Latest Budget Raises Spectre Of The Ghost Of Truss Budget Past

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Business confidence has slipped to its lowest level since the aftermath Liz Truss mini-budget in Autumn 2022. 63% of businesses say tax, including national insurance, is now a  huge concern.  A majority of firms (55%) now expect prices to go up in the next three months, with labour costs the biggest driver. Only 20% of businesses have increased investment in the past three months – 24% have decreased.

Business conditions are weak, with only 24% of firms reporting increased cashflow and 30% a decrease.

All these figures come the British Chamber of Commerce which conducted the largest poll of business sentiment since October’s budget. The BCC’s Quarterly Economic Survey, shows concern about tax, including national insurance, has spiked.   The survey was conducted after the Budget, with the fieldwork carried out between 11 November and 9 December. The data from over 4,800 businesses across the UK (91% of whom are SMEs – fewer than 250 employees) also shows that the majority of firms are expecting to raise prices.

Tax is the top external concern  This is the highest level of tax concern since 2017, when the BCC started asking this question. The levels in certain sectors are higher, with 72% of production and manufacturing firms, and 68% of construction and engineering businesses raising tax as a concern.   Concern about inflation remains broadly similar to the previous quarter – 47% compared to 46% in Q3. Worry about interest rates has fallen slightly to 28% (29% in Q3).

 

Business confidence hit by budget measures

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

 

More businesses expecting to raise prices  Over half (55%) of responding firms say they expect to raise their prices in the next three months, compared with 39% in Q3. While 43% of businesses expect prices to stay the same and only 2% expecting to decrease.   Labour continues to be the main cost pressure for firms – but the issue is now raised by 75% of businesses, up from 66% in Q3. 

Fewer firms have increased investment plans

Only 20% of businesses say they have increased investment plans over the last quarter, down from 23% in Q3. 24% of firms say they have cut back investment plans, a steep rise from the Q3 figure of 18%. 56% of businesses say their plans have remained the same.    Business conditions struggle  The percentage of respondents reporting increased domestic sales has fallen again to 32%, compared to 35% in Q3. 42% reported no change and 26% of firms said they had seen a decrease in sales.     

 

What businesses say

‘The budget has been devastating, the failure to introduce the promised business rate reform while introducing the NI changes will have a detrimental impact on the high street and the wider economy,’ is a quote from a hospitality firm in north-west England.  ’NIC Increases will have a significant impact on costs which as a price taker we are unable to pass on to customers so this will hit our profitability,’ said a manufacturing firm in Northern Ireland.

‘Labour’s decision to increase National Insurance for businesses has been a hammer blow to business confidence and has caused a reversal in plans to increase investment,’ said a construction firm in Scotland.

‘The NI increase is a real concern for us. It will add £225k to our payroll and we cannot afford it.’ Public sector firm in the east of England.  BCC

Shevaun Haviland, the director general of the British Chambers of Commerce says: “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.  “Without urgent Government action to ease the pain on businesses, the challenging economic landscape will get worse before it gets better.”   

Picture: Things are as bad business-confidence wise as when Liz Truss was briefly in charge of the country.

Article written by Cathryn Ellis
09th January 2025

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