Businesses face ‘powder keg’ of costs as Budget tax hikes loom
The vast majority of businesses will be forced to change their plans as a result of the government’s tax raid, a new survey shows, which will result in higher prices for consumers and thousands of lost jobs.
More than four out of five business leaders (82 per cent) said Labour’s national insurance hike will have an impact on their firm, according to research from the British Chambers of Commerce (BCC).
With under six weeks until the tax increase comes into force, over half (58 per cent) of firms said it would impact recruitment plans while slightly less (54 per cent) said it would prompt price rises.
More than a third (36 per cent) of the 1,200 firms participating in the survey said they would cut back investment as a result of the measure.
“The clock is ticking down to the National Insurance rise, and firms are already telling us they are sitting on a powder keg of costs,” Alex Veitch, director of policy at the BCC said.
“Most are saying they will have to raise prices and reconsider recruitment plans. That’s unlikely to create an environment that fosters growth, the key priority for government,” Veitch added.
Rachel Reeves increased the rate of employers’ national insurance to 15 per cent in the Budget while also cutting the threshold at which firms start paying the levy, measures which raised £25bn.
The Chancellor argued that the Budget policies were essential for shoring up the public finances, but a succession of surveys have suggested that businesses will slash jobs, raise prices and shelve investment plans.
A separate survey released today from the British Retail Consortium (BRC) showed 160,000 jobs in the retail sector would be put at risk due to the tax hike and the 6.7 per cent increase to the minimum wage, which will also come into force in April.
“Retailers face a mountain of costs from the Budget and while they continue to absorb costs where they can, higher prices and job losses are inevitable,” Helen Dickinson, head of the BRC said.
Andrew Griffith, shadow business secretary said: “Labour’s choice to hike National Insurance is a jobs killer that will cost many their monthly wage but also impact every single family through higher prices.”
“The tragedy is that this was all known and forecast at the time. We have a reckless Chancellor that either does not understand or does not care about the damage she is doing.”
The BCC survey showed that over three-quarters (79 per cent) of businesses said the government was not properly assessing the impact of the policy.
“The government has pledged to retain the National Insurance tax position through the life of this parliament, but our new evidence should give pause for thought,” Veitch said.