British businesses remain deeply unsettled as they face the prospect of further tax increases in the forthcoming Budget, according to a series of recent reports. The British Chambers of Commerce (BCC) has issued a stark warning that the business community is "bruised" and cannot endure another round of tax hikes without severe repercussions. This sentiment was articulated in a comprehensive survey reflecting the current economic mood among firms across the UK.

The BCC’s latest findings reveal that business confidence is languishing at perilously low levels, comparable to the aftermath of the 2022 mini-Budget. Fewer than half of firms expect trade to improve in the next year, with only 48 to 49 percent anticipating turnover growth, the lowest in recent history. The prolonged strain follows the imposition of £40 billion in additional taxes introduced in the previous Budget, notably a £25 billion increase in national insurance contributions (NICs) paid by employers. This NIC hike has been widely criticised for driving up employment costs, resulting in job losses, slower hiring, and higher prices for consumers.

David Bharier, head of research at the BCC, emphasised the toll these measures have taken on investment and pricing strategies, noting: “The employer NICs increase has been the most widely cited source of pressure, hitting investment and pushing up prices. The proportion of businesses expecting to raise prices remains worryingly high, driven primarily by labour costs.” He added that persistent weak sentiment indicates firms are bracing for more adversity, cautioning the Chancellor against repeating surprise tax measures that could further erode business confidence. The BCC’s appeal is for long-term certainty and strategic policymaking rather than reactive fiscal adjustments.

Echoing these concerns, Tesco’s chief executive Ken Murphy declared bluntly, “Enough is enough.” The BCC’s survey highlights that 59 percent of firms now list taxation as their primary concern, a sharp rise from 36 percent before last year’s Budget. Inflation, which had fallen to 1.7 percent prior to the last Budget, has surged to 3.8 percent—the highest in the G7 nations—fuelled partly by increased business costs from NICs. Inflation worries now rival taxation as a top business concern, compounding economic challenges.

The employer sentiment is mirrored in the broader labour market. The Recruitment and Employment Confederation (REC) reports significant hesitancy in hiring and pay rises across sectors, especially retail and hospitality, which were disproportionately affected by previous social security contribution hikes. REC chief executive Neil Carberry advocates for a "pro-growth" Budget approach, urging the government to avoid further unaffordable tax rises and to reconsider Labour’s Employment Rights Bill, which he fears could exacerbate employment costs and reduce flexibility.

Government fiscal discipline also remains tight. The Treasury has firmly restricted access to the £4 billion emergency reserve fund for public sector pay increases, demanding that departments must pursue internal savings before requesting additional funds. This reflects the government’s preparation for a challenging financial environment heading into the November Budget, underscoring the delicate balance between managing public spending and supporting economic recovery.

Adding complexity to the fiscal landscape, Chancellor Rachel Reeves is reportedly considering reforms to property taxation, targeting wealthier homeowners and landlords. Proposed measures include shifting stamp duty from buyers to sellers on properties over £500,000, introducing instalment payments for stamp duty, taxing capital gains on main residences, and extending National Insurance to rental income. Experts fear these changes may unintendedly hinder first-time buyers and reduce residential mobility, potentially exacerbating housing affordability issues—a concern spotted frequently in economic forecasts.

Despite these pressures, some voices recommend tough fiscal choices to stabilise government finances. The National Institute of Economic and Social Research (NIESR) has advised Rachel Reeves that raising income tax, even if it means breaking pre-election promises, might be less disruptive economically than alternative measures such as wealth or corporate tax hikes. This suggestion reflects the challenging economic and fiscal environment facing the UK government amid subdued growth forecasts and pressing fiscal demands.

Shadow Chancellor Sir Mel Stride sharply criticised the government’s approach, saying the collapse in business confidence is "not by global uncertainty, but deliberate choices made by Rachel Reeves." The economic outlook depends heavily on whether the next Budget can strike a balance between fiscal responsibility and fostering a climate conducive to growth and investment.

In summary, UK businesses are under substantial pressure from recent and prospective tax rises, with widespread calls for the Chancellor to prioritise economic stability and growth over further fiscal tightening. The chancellor faces a critical test: delivering a Budget that can simultaneously restore confidence, support investment, and manage public finances amid an already fragile economic backdrop.

📌 Reference Map:

Source: Noah Wire Services