More than half of companies are planning to raise their prices within the next three months as they face “pressure cooker” challenges of rising costs and taxes within the United Kingdom.

The British Chambers of Commerce (BCC) has said that its survey of nearly 5,000 firms indicates confidence has “slumped” to its lowest level in two years. Nearly two-thirds of the firms told the BCC they were worried about taxes following the Budget, which announced a rise in national insurance contributions (NICs) paid by firms starting in April.

Meanwhile, a Treasury spokesperson stated that the Budget would deliver stability for businesses and that more than half of employees would either see a cut or no change in their NI bills.

Raising prices carries the risk of inflation at a time when many are struggling with the cost of living.

While the rate of inflation has fallen from record highs in 2022, it rose in October and November. 

A Troubling Survey

The BCC’s survey, conducted after the Budget, found that more than 55% of firms expected to raise their prices within three months, up from the previous rating of 39%.

Shevaun Haviland, the BCC’s director general, stated that “there’s only so many things you can do.”

“You’ve got to think about putting up prices,” Haviland said, “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.”

A survey of the services sector by S&P Global suggested in December that the sector had cut jobs at the fastest pace in nearly four years.

Tim Moore, the economics director at S&P Global Market Intelligence, stated: “Faced with subdued demand conditions and hikes to employment costs, many service providers opted to curtail their staff hiring and delay backfilling roles.”

Moore went on to add: “Nearly one-in-four survey respondents saw an overall decline in their payroll numbers.”

The strength of the UK’s economy has become a focus for many following the release of the growth figures that took place just before Christmas. Official data has also shown that the economy had zero growth between July and September, and contracted in October. The figures were viewed as a blow to the Labour government, which made boosting the economy a top priority.

Worrisome Budget Measures

Businesses have warned that the Budget measures could lead to job cuts and price rises.

Kevin McNamee, a chief executive of Denroy Group, a manufacturer of plastic goods based near Belfast, told the BBC that the combined impact of the changes to minimum wage and national insurance would cost the company “hundreds of thousands of pounds.”He added that it was “inevitable” that the prices of some of the goods would have to rise to meet the higher costs.

“The focus now will be on boosting productivity, reducing headcount or certainly not adding to the headcount as the business grows and driving that productivity,” he stated.

He added that businesses were “shocked” by the changes to the national insurance.

A Rise in Insurance Contributions

Chancellor Rachel Reeves announced in the autumn Budget that employers’ national insurance contributions would rise to 15% from April of this year. She also said that the National Living Wage would increase from £11.44 to £12.21 an hour.

The BCC, which collected data from more than 4,800 businesses across the UK, reported that 91% of the firms surveyed were small and medium-sized enterprises with fewer than 250 employees. Additionally, 63% of firms reported being worried about taxes, the highest level since 2017. The survey also showed a decline in confidence, with nearly half of firms expecting sales to increase over the next year.

Shevaun Haviland stated: “The worrying reverberations of the Budget are clear to see in our survey data.” She added: “Business confidence has slumped in a pressure cooker of rising costs and taxes.”