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Business confidence slumps in ‘pressure cooker’ of higher taxes

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Business investment could bounce back up to 4.8 per cent this year, a new forecast has suggested.
Business investment could bounce back up to 4.8 per cent this year, a new forecast has suggested.

UK businesses are more worried about tax than at any point in the last eight years, a new survey shows, in the latest sign of the Budget’s “worrying reverberations” in the business community.

The British Chamber of Commerce’s quarterly survey showed that 63 per cent of firms cited tax as a worry in the final quarter of last year, up from 48 per cent in the third quarter.

This was the highest proportion of firms who were concerned about the tax burden since the question was first asked back in 2017. It shows how the Budget has spooked many businesses.

Chancellor Rachel Reeves hiked employers’ national insurance to 15 per cent in the Budget and also slashed the threshold at which firms have to start paying the levy.

Shevaun Haviland, director general of the BCC, said that the tax hike sent a chill through corporate confidence in the final three months of the year.

“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,” she said.

The survey showed that business confidence fell to its lowest level since the aftermath of the mini-Budget, with only 49 per cent of firms anticipating turnover to increase in the next year.

Over half (55 per cent) of firms said they plan to raise prices in the next three months, up from 39 per cent who said the same in the third quarter.

Investment plans appear to have been scaled back too. Nearly a quarter (24 per cent) of respondents said they have cut back back investment plans, up from 18 per cent the quarter before.

“The worrying reverberations of the Budget are clear to see in our survey data,” Haviland said. “Business confidence has slumped in a pressure cooker of rising costs and taxes.” 

A separate survey from BDO shows that the Budget is not the only concern for businesses entering the New Year.

Over a quarter (29 per cent) of respondents are dealing with significant supply chain challenges, which have caused delayed deliveries and inventory shortages.

The prospect of tariffs on global trade has only exacerbated business fears about supply chain disruption, the survey suggested.