Bruised Businesses in Britain Worry Over Tax Rises and Persistent Inflation Ahead of Budget

Britain’s small and medium-sized businesses are expressing mounting concern over the twin threats of rising taxes and stubborn inflation rates as the country heads towards the next budget announcement. A recent survey from the British Chambers of Commerce (BCC) reveals the private sector remains anxious and outlooks for growth are subdued.

The BCC’s quarterly report, which polled 4600 companies with over 90 percent representing SMEs, shows little improvement in key sentiment indicators since 2022. About a third of businesses expect turnover to stay the same over the next year, while 48 percent anticipate an increase in revenue—a slight decrease from the previous quarter and markedly lower than last year’s results, prior to the current government’s major fiscal moves.

One in five businesses now expects revenue to fall, highlighting the fragility facing many firms. The survey identifies tax changes as the predominant concern, with 59 percent citing this as their chief worry. This figure has risen considerably since the second quarter of 2024, signalling a shift in business confidence following increased employers’ National Insurance contributions (NICs) earlier this year.

Inflation has resurfaced as a growing threat, with annual price growth forecasted to reach 4 percent due to climbing food and utility costs. According to the BCC, the proportion of businesses troubled by inflation is at its highest since early 2024, with 57 percent of respondents listing it among their top pressures.

The rise in employer NICs and increases to the National Living Wage have squeezed margins for retailers, pushing many to pass on higher costs to consumers. The Bank of England notes that these pressures are intensifying food price inflation across the supply chain.

David Bharier, BCC’s head of research, emphasised that businesses feel battered after a year of consistently high costs and weak investment, with little optimism for imminent relief. Labour costs, driven mainly by the NICs rise, are prompting a significant portion of businesses to consider price hikes in the coming months.

Government officials maintain that further tax increases have not been ruled out as they seek £30 billion in savings to meet fiscal rules. Wealth taxes on property, pensions and land are under consideration. Feedback from businesses, such as a medium-sized transport firm in Aberdeen, makes clear that spiralling costs and a rising tax burden are threatening commercial viability for many.