Reeves’ £25bn tax grab to become ‘toxic reality’ for British business, firms suggest
Chancellor Rachel Reeves’ £25bn tax grab from employers will become a “toxic reality” for British businesses from Sunday as higher costs risk stunting firms’ income, one of the UK’s largest industry bodies has warned.
Reeves’ has pinned her hopes for improving the state of public finances on growing the UK economy but more firms have scaled down their investment plans in the first three months of the year, a British Chambers of Commerce (BCC) survey of around 5,200 companies found.
Around three in five businesses said Reeves’ £25bn national insurance tax raid on employers was their main concern as less than half of companies said they expected their turnover to increase in the next 12 months.
The BCC said concerns over taxes were the second highest they had recorded since 2017 when the survey first started.
Half of firms said they were concerned about inflation, which could peak at around 3.75 per cent later this year according to the Bank of England.
Transport and manufacturing firms are especially concerned as they worry tax increases could batter profits.
The report cited comments from businesses claiming that costs were rising by £500,000 over the course of the year while profit was set to be shed by as much as 25 per cent.
Taxes on businesses are set to change radically from April 6.
The threshold at which employers start to make national insurance contributions (NICs) will be lowered to £5,000 from £9,100 while the rate of tax will increase 1.3 percentage points to 15 per cent.
Over half of respondents also said they planned to raise prices in the next three months as employment costs quickly spiral.
“The national insurance rise has been an impending concern for months,” Shevaun Haviland, director general of the BCC, said.
“From this weekend, it will become a toxic reality for millions of businesses across the UK. Our survey shows tax…. remains the top concern, with firms telling us they are planning to cut investment and raise prices, just to balance the books.”
Haviland also said sweeping tariffs announced by President Trump on UK exports to the US, ranging between ten per cent for most goods and 25 per cent for UK vehicle exports, were also set to deal a “hammer blow” to firms dependent on international trade.
“The cost pressures for business at home and abroad are now huge,” she said.
Firms also raised concerns about weak demand as under a third of respondents reported increased domestic sales while a quarter saw a fall.
The economic strains have prompted the BCC to urge the government to make its tax policy clearer, focus on infrastructure investment and rethink its controversial Employment Rights Bill in order to boost growth.
“Sustained economic growth will only come through businesses, not government,” Haviland said.
“While there were some limited announcements in the Spring Statement which we welcome – it is hard to get away from the bleak growth predictions.”
Reeves has reiterated that the Autumn Budget at which she raised £40bn in taxes was a unique event to put the public finances on more stable ground.
But various researchers and analysts have suggested that Reeves will have to raise taxes again later this year if she is to abide by her fiscal rules.