The largest poll of business sentiment since October’s Budget shows increasing concern about the impact of higher employer national insurance contributions, with the majority of firms saying they plan to raise prices to offset the cost.
In the survey by the British Chambers of Commerce (BCC), 63% of firms cited taxes as a worry (compared with 48% in Q3), the highest level on record. Concern about inflation and interest rates remained at similar levels to the previous quarter.
Following the Chancellor’s autumn statement, business confidence has also declined significantly, with only 49% of responding companies expecting their turnover to increase over the next twelve months (compared with 56% in Q3). Confidence levels are lowest in the retail and hospitality sectors (39% and 42% respectively). The figures are the worst since the aftermath of the disastrous Liz Truss mini-budget in late 2022.
Profitability confidence has also been hit, with 40% of firms expecting profits to increase over the next year (48% in Q3), while 32% of businesses expect them to fall.
With firms also facing a National Living Wage increase in April, over half (55%) said they expect to raise their prices in the next three months, compared with 39% in Q3. Labour continued to be the main cost pressure for firms, with the issue now a concern for 75% of businesses, up from 66% in Q3. It is the most significant for the hospitality sector, with 87% reporting it as a challenge, followed by 84% of firms in the transport and logistics sector.
Meanwhile, only 20% of businesses said they have increased investment plans over the last quarter, down from 23% in Q3. 24% of firms stated that they have cut back investment plans, a steep rise from the Q3 figure of 18%. 56% of businesses said their plans have remained the same. However, the issue is more marked in certain sectors, with 42% of retail and hospitality firms reporting a scaling back of investment and 30% of manufacturers.
“The worrying reverberations of the Budget are clear to see in our survey data. Businesses confidence has slumped in a pressure cooker of rising costs and taxes,” said Shevaun Haviland, Director General of the BCC.
“Firms of all shapes and sizes are telling us the national insurance hike is particularly damaging. Businesses are already cutting back on investment and say they will have to put up prices in the coming months.
“The Government is rightly coming up with long-term strategies on industry, infrastructure and trade. But those plans won’t help businesses struggling now.
“Business stands ready to work in partnership to make the proposed Employment Rights legislation work for all, but the current plans will add further costs on firms.
“To help business we need to see quick action in three specific areas. Firstly, ministers should accelerate business rate reform to create a system that incentives investment.
“We also need the Government to speed up infrastructure investment to help SMEs in supply chains across the country. Finally, it’s crucial to support exports, prioritising a better trading deal with the European Union.
“Without urgent Government action to ease the pain on businesses, the challenging economic landscape will get worse before it gets better.”
NAM Implications:
- The key for pragmatic business people is to focus on how their business can grow…
- …given the Autumn Budget increased costs emerging from the pipeline.
- (i.e. leave ‘causes’ analyses to others)
- That said, crazy to ignore the reality of inevitabilities in the marketplace.
- (whilst asking why 45% of businesses don’t plan to raise their prices in the next three months…)
