Recent data reveals a concerning trend among UK businesses, with many bracing for price increases and potential job cuts in the wake of recent tax and wage adjustments. A survey conducted by the British Chambers of Commerce (BCC) highlights that nearly one-in-four respondents have reported an overall decline in their payroll numbers, indicating a troubling shift in the employment landscape.
The BCC gathered insights from nearly 5,000 firms across the UK between November 11 and December 9, revealing that confidence among businesses has "slumped" to its lowest level in two years. The economy has shown zero growth between July and September, with contractions observed in October. Despite a sharp decline in inflation rates from record highs in 2022, recent reports indicate that inflation rose again in both October and November.
This tumultuous environment follows the Labour government's commitment to revitalizing the economy. The government aims to restore stability and foster growth through various measures. However, businesses have voiced concerns that the recent Budget measures could have adverse effects.
More than half of the companies surveyed by the BCC are planning to raise prices within the next three months. This is largely attributed to rising employer National Insurance Contributions (NICs) and an increased National Living Wage, which many fear may lead to job cuts. The business group noted that this is the lowest confidence level since the aftermath of the mini-budget in late 2022, when inflation was at its peak.
Dame Irene Hays, a prominent business leader, commented on the challenges faced by firms: "There are always changes on costs… and it's a case of just being very careful and managing those as best we can." She emphasized that the economic landscape requires vigilance and adaptability.
Kevin McNamee, another industry representative, expressed his concerns over the implications of rising costs. He stated that it was "probably inevitable" that some prices would need to rise to offset higher operational expenses. He further elaborated on the significant financial impact: "hundreds of thousands of pounds, it's really significant."
Tim Moore from S&P Global noted a worrying trend in the services sector, where job cuts occurred at the fastest pace in nearly four years during December. He explained, "Faced with subdued demand conditions and hikes to employment costs, many service providers opted to curtail their staff hiring and delay backfilling roles."
Shevaun Haviland from the BCC underscored the pressures businesses face amid rising costs and taxes, describing it as a "pressure cooker." She said, "You've got to think about putting up prices… or you've got to take that hit in your margin, which means you have less money to invest in the future, or you've got to look at your recruitment and staff costs. So it's really, really tough."
In contrast, a Treasury spokesperson defended the government's position, stating, "We have ensured more than half of employers will either see a cut or no change in their National Insurance bills." They added, "We are bringing back political and financial stability, creating the conditions for economic growth through investment and reform."
Despite these reassurances, many business leaders remain skeptical about the government's ability to incentivize investment. McNamee remarked, "It's hard to see how the Budget incentivises businesses to invest to grow; we've had our pockets picked to an extent here."
The data collected by the BCC suggests that businesses are navigating a complex landscape filled with uncertainty. With inflation rising again after a period of decline and economic growth stagnating, firms are left weighing difficult choices as they plan for the coming months.