Rising Costs and Taxes Force UK Firms to Consider Price Hikes Amid Economic Uncertainty

More than half of UK companies are preparing to increase prices within the next three months due to significant pressures from rising costs and taxes, revealed a survey by the British Chambers of Commerce (BCC) involving over 4,800 firms. The BCC noted that business confidence has plunged to its lowest in two years, exacerbated by concerns over the national insurance contributions hike announced in the recent Budget.

With nearly two-thirds of companies expressing worry about the implications of higher taxes, the potential price increases risk further fueling inflation, which remains a significant concern for consumers already grappling with the cost of living. While inflation rates have decreased since record highs in 2022, recent figures showed a rise in inflation for October and November.

The UK economy has generated zero growth from July to September and contracted in October, making it a challenging period for the Labour government, which prioritizes economic improvement. KPMG has projected a modest economic growth of 1.7% for the upcoming year but cautioned that while consumer spending may increase, it might also lead to persistent inflation due to businesses passing on the costs of new taxes.

Business leaders have warned that the combination of rising employer national insurance contributions and an increase in the National Living Wage could lead to job cuts as well as higher prices. Kevin McNamee, CEO of Denroy Group, noted that the fiscal changes would significantly impact his company’s costs, leading to inevitable price rises for their products. The BCC’s survey showed that 55% of participating firms expect to increase prices, up from 39% the previous quarter. Furthermore, only 49% anticipate an increase in sales over the next year—the lowest level since late 2022.

The BCC’s director general emphasized the damaging effects of the national insurance hike on business confidence and investments. In contrast, a Treasury spokesperson defended the Budget, arguing that it aims to foster stability and create favorable conditions for economic growth.