British firms brace for ‘eye-watering’ April cost hikes
Businesses across the UK are bracing for one of the worst weeks of cost hikes in recent history, with industry groups warning that the “eye-watering” rise in firms’ overheads will hamper investment and hiring, and result in higher prices at the till.
Hikes to the minimum wage and employers’ National Insurance contributions announced in October’s Budget both come into force this week, coinciding with rises in the wholesale energy price, water bills and reforms to business rates.
And on the day that the above-inflation rise in the National Living Wage and energy and water bill jumps come into force, three of the country’s largest industry bodies have launched a scathing assessment of what the confluence of higher costs will mean for British firms.
Helen Dickinson, the chief executive of the British Retail Consortium, branded the overhead maelstrom a “bombshell”, telling City PM: “This huge cost burden will undoubtedly reduce investment in stores ad jobs, and is likely to lead to higher prices.”
Meanwhile Kate Nicholls, chief executive of UK Hospitality, said the “eye-watering” rise in overheads faced by pubs, bars and other venues mean “stark” consequences for businesses and communities across the country.
“We’ve already seen a chilling effect on investment plans and job creation – all of which have been put on hold or shelved,” she said, adding that venues were already reducing trading hours and bearing down on on headcount.
The comments follow months of warnings from firms and a slew of dire business surveys revealing confidence among business owners has collapsed since the Autumn Budget.
In January, the British Chambers of Commerce’s (BCC) Quarterly Economic Survey found optimism among firms plummeted to the same level as in the immediate aftermath of Liz Truss’s disastrous mini-Budget. And a fresh survey published on Tuesday from the Institute of Directors found that just one in ten business leaders were optimistic about the UK economy.
Now, the BCC’s deputy director of public policy, Jane Gratton, has told City PM that this week’s “escalation in business costs” had led to “record high” concerns among businesses. She warned that – amid rampant uncertainty around trade conditions and the extent of further cost pressures- the operating environment was likely to get worse still.
“With further tariffs also hanging over the economy and the Employment Rights Bill (ERB) set to add £5bn to costs, it’s likely to get a lot worse,” she said. “The government must show it understands the pressures firms are under and act now to lighten the load.”
Gratton’s warnings of further pipeline pressures were echoed by Dickinson, who said retailers faced “£7bn in extra costs this year” once the government’s planned packaging tax comes into force in October.
A Treasury spokeswoman said: “We are a pro-business government, and we know the vital importance of small businesses to our economy and have already achieved a great deal in a short period of time, including protecting the smallest businesses from the employer National Insurance rise and late payments, protecting 250,000 retail, hospitality and leisure business properties from paying full business rates and capping corporation tax.”