Tax fears heat up as firms ‘not ready for another Budget battering’
Tax fears across businesses in the UK are bubbling up, a leading survey has indicated, as Chancellor Rachel Reeves is warned that firms are “not ready for another Budget battering” later this year.
The British Chambers of Commerce (BCC)’s survey has shown that business confidence remains in a fragile state amid nerves that another damaging Budget could slow down sales across the UK economy.
It pointed to growing concern among more than 4,600 firms that fears of another brutal tax raid had not subsided despite efforts by Labour ministers to reassure industry.
Just under 60 per cent of respondents cited the tax burden as a top worry in the survey conducted between July and September.
This figure compared with just 56 per cent in the second quarter and 36 per cent before last year’s Budget.
Inflation was the second biggest concern among firms, with research showing there had been a sharp rise in the number of firms ringing the alarm bell on price growth compared to the second quarter of the year.
Overall confidence among businesses remained low, with fewer than half of respondents (48 per cent) expecting turnover to increase over the next 12 months.
A fifth (21 per cent) of businesses expected sales to worsen. Just 35 per cent of of retailers said they expected to see higher revenue while 38 per cent in the hospitality sector saw it rising.
Smaller firms particularly nervous
The survey also showed that more firms had scaled back investment plans for the next 12 months than increased them, with the trend particularly prevalent across the hospitality and retail sectors.
The data could be particularly concerning in light of Labour’s ambition to back small and medium-sized businesses (SMEs), with nine in ten participants being from companies that have fewer than 250 employees.
The pressures on a domestic front are also clear to see in the data given a minority of respondents (43 per cent) were exporters.
David Bharier, head of research at the BCC, said new data showed the downbeat narrative across the UK economy had barely changed after a £20bn hike in employers’ national insurance contributions (NICs) last year had hit investment and jacked up prices.
“Ahead of the Chancellor’s statement next month, our survey shows many firms remain bruised and are not ready for another Budget battering.
“The proportion of businesses expecting to raise prices remains worryingly high, driven primarily by labour costs. Inflation now sits alongside taxation as a top concern.
“The global shift towards protectionism and tariffs has also been a major compounding factor.
“Persistent weak sentiment this quarter may suggest that many firms have already priced in a tough Budget. But further surprise measures that hit business, like those seen in 2024, could drive confidence even lower.”
Warning to Rachel Reeves
The data will send a warning to Reeves after she told business leaders last year she was “not coming back with more borrowing or more taxes”.
At the Labour party conference, Keir Starmer also recognised that businesses had taken the burden of the costs for extra spending.
But rumoured taxes on banks, capital gains taxes and changes to business rates could still disproportionately hit some employers.