According to a survey by the British Chambers of Commerce, British companies have been priced to cover higher tax payouts as business confidence has fallen to its lowest level since the market-rocking “mini-budget” crisis of autumn 2022.
The trade group said sentiment had fallen “significantly” in its biggest survey since the Labor government's debut budget last October, which included an increase in the amount many employers pay in National Insurance (NI), a tax on profits, pay out.
The BCC said 63% of businesses cited taxes as a concern in the survey, up from 48% in the third quarter. More than half (55%) said they expect prices to rise in the next three months, primarily due to higher labor costs.
The percentage of companies that expected revenue to increase over the next twelve months fell from 56% to 49%. Concerns about inflation and interest rates remained roughly stable.
The BCC cited companies in hospitality, manufacturing, construction and health care as concerned about how they would cover additional costs and said they would likely scale back investments.
“We realize something [Reeves] said she needs to raise taxes to fill her black hole, but what we need to do now is for her to cut back. What will we do to drive the economy forward? Shevaun Haviland, head of the BCC, told CNBC's “Squawk Box Europe” on Monday.
“Businesses will have to bear this tax increase, but what we want to do is action, and they need to act quickly. It is important that they put strategies in place, industrial strategy, commercial strategy, infrastructure plan, for later this year we need to see action now. “
Borrowing costs in the UK rose after the October 2024 budget, exceeding levels seen after the September 2022 “mini-budget” in which then-Prime Minister Liz Truss announced a sweeping, unfunded tax cut.
However, economists say the recent rise in bond yields does not match the rise seen in 2022 because the moves have been significantly less dramatic and the macro backdrop – including cooling inflation – has changed.
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