More than half of private sector firms are planning price hikes to help offset looming tax increases announced in the chancellor’s first budget , according to a corporate lobby group.
The British Chambers of Commerce (BCC) warned business confidence was at its lowest level since the market meltdown that followed the Conservatives’ mini budget of autumn 2022.
Its survey of almost 5,000 firms found worries about tax stood at levels not seen since 2017.
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Labour had fought a growth-focused election on the back of an improved working relationship with business but there was a widespread sense of shock when the 30 October budget put businesses on the hook for the bulk of £40bn of tax increases.
The new government argued the hikes were necessary to lock in long overdue investment in public services due to an alleged black hole in the public finances inherited from the Tories.
But companies widely warned the higher costs, from measures such as higher employer National Insurance contributions and National Living Wage increases from April, would be passed on to customers and hit wage growth, employment and investment.
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At a time when the Bank of England is struggling to cut interest rates due to stubborn cost pressures in the economy, there will be concern among policymakers over the threat posed by potential business price hikes ahead.
The BCC survey found 55% of companies were planning to raise their own sales costs.
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Such a move would threaten further upwards pressure on inflation while weak business confidence will also do little to lift the economy out of the doldrums witnessed during the second half of 2024 when government warnings of a “tough” budget ahead were widely blamed for hitting sentiment.
Financial markets currently see just a 60% chance of a Bank rate cut at the next meeting in a month’s time.
BCC director general Shevaun Haviland said: “The worrying reverberations of the budget are clear to see in our survey data. Businesses’ confidence has slumped in a pressure cooker of rising costs and taxes.
“Firms of all shapes and sizes are telling us the national insurance hike is particularly damaging. Businesses are already cutting back on investment and say they will have to put up prices in the coming months.
“The government is rightly coming up with long-term strategies on industry, infrastructure and trade. But those plans won’t help businesses struggling now.
“Business stands ready to work in partnership to make the proposed Employment Rights legislation work for all, but the current plans will add further costs on firms.”
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The BCC said the government could help firms absorb the additional pressures in areas such as business rates reform and through infrastructure investment.
The Treasury has been approached for comment.
