Business leaders warn Budget tax hikes could trigger higher prices
Senior business leaders have called on the government to avoid increasing the cost of employment in the upcoming Autumn Budget, in order to avoid SMEs raising prices.
According to a new report by Employment Hero, 86 per cent of the 1,000 business leaders are concerned about what the upcoming Budget will mean for them, as Rachel Reeves is expected to raise taxes.
This comes after employer national insurance contributions (NICs) increased from 13.8 per cent to 15.05 per cent, taking effect from 6 April.
Over half (59 per cent) said they feel the UK government doesn’t take the needs of small companies into account when making Budget decisions.
If Reeves hikes employment costs again, such as employer NICs, it could “damage the government’s mission to drive economic growth and control inflation”.
Nearly half of businesses (49 per cent) said they would consider raising prices if employment costs increased, potentially fueling “further inflationary pressure on the economy”.
Additionally, if employment costs increase, over a third (33 per cent) of leaders said they would delay hiring, and a further 24 per cent would consider making redundancies.
Businesses, particularly SMEs, have been sounding the alarm on the effects the Employment Rights Bill, once passed, will have on businesses at a time when most are struggling.
Budget 2024 still felt
The impacts from Reeves’ first Budget last year remain front of mind for business, with 72 per cent of leaders reporting that the announcement had an impact on their company.
However, Employment Hero’s data revealed that recovery in the UK labour market is holding up, as employment increased by 2.3 per cent month-on-month in October, and is up 1.9 per cent compared to this time last year.
Employment Hero’s UK managing director, Kevin Fitzgerald, said: “When you tax small businesses, you tax everyone.”
“It creates a domino effect, higher costs lead to higher prices, fewer jobs, and less money in people’s pockets. Small businesses employ the majority of our workforce. Make life harder for them, and you make it harder for Britain to grow.”
“The Autumn Budget is an opportunity to learn from past mistakes,” Fitzgerald stated.
“If the government wants to continue this job growth and control inflation, they can’t keep penalising the very businesses that power our economy. We simply can’t afford a repeat performance. The way to get Britain working again is to back small businesses, not burden them,” he added.