Fragile business confidence persists amid national insurance hike, warns BCC
Fragile business confidence persists amid national insurance hike, warns BCC
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Business confidence across the UK remains subdued in the wake of April’s employer National Insurance (NI) rise, according to new data from the British Chambers of Commerce (BCC).
The Q2 Quarterly Economic Survey, the largest independent business sentiment report since the hike, shows just 49% of firms expect turnover to increase in the next 12 months , only marginally up from 48% in Q1 and one of the lowest readings since the 2022 mini budget.
While the number of firms planning to raise prices has dropped (from 55% in Q1 to 44%), tax remains the top concern for businesses with 56% citing it, a reflection of the impact of the recent NI increase. Inflation (52%) and labour costs (73%) are also major concerns, particularly in sectors such as transport and hospitality.
Sales remain stagnant, with only 32% of firms reporting a rise in domestic sales, virtually unchanged from the previous quarter. Confidence is lowest in hospitality (33%) and retail (44%), the sectors hardest hit by rising costs and consumer uncertainty.
Investment remains suppressed, with 24% of firms cutting back over the last three months and just 21% increasing investment. The trend is most severe in hospitality (39%) and transport (32%).
Labour cost pressures remain a key challenge, unchanged at 73% from Q1. These costs are especially acute for logistics (88%) and hospitality (83%) firms. The BCC notes this is fuelling anxiety about redundancies, with some firms warning of job losses reminiscent of the 2008 financial crisis.
Gus Williams, interim CEO of Chambers Wales South East, South West and Mid: “The economy remains in a holding pattern, there’s no doubt that the NI and NMW rises put a hold on investment and hiring plans for many businesses in Wales and those businesses are still waiting to see how their revenues and margins hold up this year.
“Barring bad news, I think confidence will pick up through the year but there are just so many unknowns. Policy driven uncertainty in the form of tariffs and regulations still weigh on business decisions, and longer-term trends such as ageing populations will have an impact on consumer behaviour and priorities which are difficult to predict.
“In the plus column, the UK remains a relatively good place to do business for global investors. I’m watching closely to see when planning changes will come into effect and whether they can provide a boost to the construction and housing sectors, seeing spades in the ground in relation to the industrial strategy and eased trading agreements with the EU will also boost confidence when they come but we’d like to see greater prioritisation of efforts to accelerate these initiatives.”
Shevaun Haviland, Director General of the BCC, said: “Confidence levels remain at their lowest since 2022. While the drop in planned price increases is welcome, costs are still volatile, and the burden on businesses is high.
“We now need the Government to rule out any further tax hikes in this year’s Budget and accelerate the delivery of long-term growth strategies. Businesses need urgent action on reducing costs, reforming regulation, and removing skills barriers.”
David Bharier, BCC Head of Research, added: “April’s NI rise cemented tax as the top concern. SMEs are navigating structurally higher labour costs and regulatory complexity in a fragile economic environment.
A meaningful recovery will require easing the tax and admin burden, de-escalating geopolitical tensions, and improving UK-EU trading arrangements.”
