UK businesses report record tax concerns post-Budget, confidence falls

Business confidence has declined significantly with 49 per cent of responding companies expecting their turnover to increase over the next twelve months (compared with 56 per cent in Q3). Confidence levels are lowest in the retail sector at 39 per cent.

Seventy-two per cent of production and manufacturing firms raised tax as a concern. Concern about inflation remains broadly like the previous quarter—47 per cent compared to 46 per cent in Q3. Worry about interest rates has fallen slightly to 28 per cent (29 per cent in Q3).

There has been a significant drop in business confidence since the chancellor’s statement. Only 49 per cent of firms say they expect their turnover to increase in the next twelve months, down from 56 per cent in Q3. This is the lowest figure since the aftermath of the mini Budget in late 2022. A fifth (21 per cent) of businesses expect turnover to worsen, up from 15 per cent in Q3, and 30 per cent expect no change. Profitability confidence has also been hit, 40 per cent of firms expect profits to increase over the next year (48 per cent in Q3), while 32 per cent of businesses expect them to fall.

Over half (55 per cent) of responding firms say they expect to raise their prices in the next three months, compared with 39 per cent in Q3. While 43 per cent of businesses expect prices to stay the same, and only 2 per cent are expecting the prices to decrease.

Labour continues to be the main cost pressure for firms – but the issue is now raised by 75 per cent of businesses, up from 66 per cent in Q3. Eighty-four per cent of firms in the transport and logistics sector reported it as a challenge.

Only 20 per cent of businesses say they have increased investment plans over the last quarter, down from 23 per cent in Q3. Twenty-four per cent of firms say they have cut back investment plans, a steep rise from the Q3 figure of 18 per cent. Fifty-six per cent of businesses say their plans have remained the same.

The issue is more marked in certain sectors, with 42 per cent of retail and hospitality firms reporting a scaling back of investment and 30 per cent of manufacturers. The percentage of respondents reporting increased domestic sales has fallen again to 32 per cent, compared to 35 per cent in Q3.

Forty-two per cent reported no change and 26 per cent of firms said they had seen a decrease in sales. Retailers were the most likely to have seen a fall in sales (36 per cent) followed by manufacturers (33 per cent), the survey revealed.

A large manufacturing firm in Northern Ireland reported that the rise in national insurance contributions (NIC) would significantly increase costs, which, as a price taker, they cannot pass on to customers, ultimately affecting their profitability. Meanwhile, a medium-sized public sector firm in East England, operating as a hospice, expressed concern over the NI increase, which will add £225,000 (~$282,163) to their payroll, a cost they cannot afford.

“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. 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,” said Shevaun Haviland, director general of the British Chambers of Commerce. “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.”

“This dataset is a clear signal that business sentiment has been significantly impacted following recent policy announcements, notably national insurance increases. Taxation is now by far the biggest concern, cited by 63 per cent of businesses. Confidence has now dipped to 2022 levels, with less than half of firms expecting improved turnover over the next year and over a fifth now expecting it to worsen,” said David Bharier, head of research at the British Chambers of Commerce.

The survey was conducted after the Budget, with the fieldwork carried out between November 11 and December 9. The data from over 4,800 businesses across the UK (91 per cent of whom are SMEs – fewer than 250 employees) also shows that the majority of firms are expecting to raise prices.

ALCHEMPro News Desk (SG)