More than half of UK businesses are preparing to raise prices in the next three months, according to a survey by the British Chambers of Commerce (BCC). The research highlights that UK business confidence has fallen to its lowest level since the political turmoil of Liz Truss’s brief tenure as prime minister.
Majority of Businesses Plan Price Increases
The BCC survey, which polled 4,800 companies, revealed that 55% expect to increase prices by April 2025, a significant rise from 39% in the second half of 2024. This spike reflects growing pressure on businesses grappling with rising costs and the impact of tax increases introduced in the government’s October budget.
Taxation and Business Concerns
The budget, aimed at raising £40 billion in additional revenues, included a controversial £25 billion increase in employer national insurance contributions (NICs). This measure has sparked widespread criticism from business groups. According to the BCC, 63% of companies cited taxation as a major concern, up from 48% just three months earlier.
Shevaun Haviland, Director General of the BCC, described the situation as a “pressure cooker” of rising costs and taxes, with businesses cutting back on investment and warning of further price hikes. “The national insurance hike is particularly damaging,” she added.
Decline in Business Confidence
The BCC’s confidence index, which measures expectations of turnover growth over the next year, dropped significantly from 56% to 49%. This decline underscores the challenges businesses face in navigating economic uncertainty and inflationary pressures.
Bank of England Faces Tough Decisions
Financial markets are predicting steep interest rate cuts from the Bank of England this year, but policymakers remain cautious due to persistent inflation. The Bank has acknowledged the budget’s negative impact on UK economic growth, adding to concerns about the global economy, including the potential effects of steep tariffs under Donald Trump’s second term as US president.
Potential Job Cuts and Economic Struggles
A separate survey, the purchasing managers’ index (PMI), revealed a sharp decline in employment expectations, with the index falling to 45.6—the lowest in four years. Many businesses reported plans for price increases and potential job cuts as they prepare to absorb higher taxes and costs.
Thomas Pugh, economist at RSM UK, called the combination of weak growth and rising inflation a “nightmare trade-off” for the Bank of England’s Monetary Policy Committee (MPC). He predicted cautious rate cuts throughout the year, noting the need to balance inflation control with economic stability.