A survey by the British Chambers of Commerce has revealed business confidence has declined significantly with 49% of responding companies expecting their turnover to increase over the next twelve months (compared with 56% in Q3). Confidence levels are lowest in the retail and hospitality sectors (39% and 42% respectively).
The survey was conducted after the Budget, with the fieldwork carried out between 11th November and 9th December. The data from over 4,800 businesses across the UK (91% of whom are SMEs – fewer than 250 employees) also shows that the majority of firms are expecting to raise prices.
- 63% of businesses say tax, including national insurance, is now a concern, following the Chancellor’s Budget – the highest level since 2017
- Business confidence has slipped to its lowest level since the aftermath of the mini-Budget in Autumn 2022
- A majority of firms (55%) now expect prices to go up in the next three months, with labour costs the biggest driver
- Only 20% of businesses have increased investment in the past three months – 24% have decreased
- Business conditions are weak, with only 24% of firms reporting increased cashflow and 30% a decrease
Tax now by far the top external concern
Following the Budget, concern about taxation is now cited by 63% of responding firms, up from 48% in Q3. This is the highest level of tax concern since 2017, when the BCC started asking this question. The levels in certain sectors are higher, with 72% of production and manufacturing firms, and 68% of construction and engineering businesses raising tax as a concern.
Concern about inflation remains broadly similar to the previous quarter – 47% compared to 46% in Q3. Worry about interest rates has fallen slightly to 28% (29% in Q3).
Business confidence hit by Budget measures
There has been a significant drop in business confidence since the Chancellor’s statement. Only 49% of firms say they expect their turnover to increase in the next twelve months, down from 56% in Q3. This is the lowest figure since the aftermath of the mini budget in late 2022. A fifth (21%) of businesses expect turnover to worsen, up from 15% in Q3, and 30% expect no change.
Profitability confidence has also been hit, 40% of firms expect profits to increase over the next year (48% in Q3), while 32% of businesses expect them to fall.
More businesses expecting to raise prices
Over half (55%) of responding firms say they expect to raise their prices in the next three months, compared with 39% in Q3. While 43% of businesses expect prices to stay the same, and only 2% expecting to decrease.
Labour continues to be the main cost pressure for firms – but the issue is now raised by 75% of businesses, up from 66% in Q3. The issue is most significant for the hospitality sector with 87% reporting it as a challenge, followed by 84% of firms in the transport and logistics sector.
Fewer firms have increased investment plans
Only 20% of businesses say they have increased investment plans over the last quarter, down from 23% in Q3. 24% of firms say they have cut back investment plans, a steep rise from the Q3 figure of 18%. 56% of businesses say their plans have remained the same.
The issue is more marked in certain sectors, with 42% of retail and hospitality firms reporting a scaling back of investment and 30% of manufacturers.
Business conditions struggle
The percentage of respondents reporting increased domestic sales has fallen again to 32%, compared to 35% in Q3. 42% reported no change and 26% of firms said they had seen a decrease in sales.
Retailers were the most likely to have seen a fall in sales (36%) followed by manufacturers (33%).
Dorchester Chamber for business president Steve Bulley said:
“It is a difficult time for small businesses and our members are worried about the financial pain expected following the budget many which will hit in April.
“The situation has been made worse by weaker trading in the last quarter of 2024 due to customer confidence. We have heard from members who have been waiting for contacts to be signed for months due to the overall economic uncertainty.
“As a Chamber we are committed to offering help and support to our members and continue to lobby for a fair deal for small business in Dorset,”
Shevaun Haviland, Director General of the British Chambers of Commerce said:
“The worrying reverberations of the Budget are clear to see in our survey data. Businesses confidence has slumped in a pressure cooker of rising costs and taxes.
“Firms of all shapes and sizes are telling us the national insurance hike is particularly damaging. Businesses are already cutting back on investment and say they will have to put up prices in the coming months.
“The Government is rightly coming up with long-term strategies on industry, infrastructure and trade. But those plans won’t help businesses struggling now.
“Business stands ready to work in partnership to make the proposed Employment Rights legislation work for all, but the current plans will add further costs on firms.
“To help business we need to see quick action in three specific areas. Firstly, ministers should accelerate business rate reform to create a system that incentives investment.
“We also need the Government to speed up infrastructure investment, to help SMEs in supply chains across the country. Finally, it’s crucial to support exports, prioritising a better trading deal with the European Union.
“Without urgent Government action to ease the pain on businesses, the challenging economic landscape will get worse before it gets better.”
Information from British Chambers of Commerce press relase Budget Tax Hike Bursts Business Confidence – British Chambers of Commerce
