Tax Increases to Hit UK Businesses Hard, Surveys Show

British employers are bracing for a significant financial impact from the government's upcoming tax increases, leading to widespread price hikes, job cuts, and plummeting business confidence, according to multiple surveys cited by Reuters.

Two major surveys, one by the Chartered Institute of Personnel Development (CIPD) and another by the Federation of Small Businesses (FSB), highlight the significant negative sentiment among employers following the October 30 budget announcement by Chancellor Rachel Reeves.

The CIPD survey reveals that a staggering 90% of employers anticipate increased employment costs due to the impending payroll tax hikes scheduled for April. This expectation has triggered significant responses, with 42% planning to raise prices and 32% intending to reduce headcount through redundancies or hiring freezes.

The FSB survey paints an equally concerning picture, reporting that confidence among small businesses has plunged to its lowest level in five years, reaching its nadir since the onset of the COVID-19 pandemic in early 2020. This sharp decline echoes other economic indicators that have been negatively impacted since the budget announcement.

The CIPD's Chief Executive, Peter Cheese, notes that the current drop in employer sentiment is the most substantial in a decade, excluding the pandemic period. "Employer confidence has been impacted by planned changes to employment costs, and employment indicators are heading in the wrong direction," Cheese stated.

The FSB survey further underscores the severity of the situation, indicating that approximately 25% of small businesses anticipate a contraction in their operations. "The fourth-quarter blues reported by small firms underline how urgently the government's growth push is needed," said Tina McKenzie, the FSB's policy chair.

Despite these concerning trends, Chancellor Reeves has maintained that the tax increases are a one-time measure aimed at stabilizing public finances while generating funds for crucial services and investments. However, these assurances appear to be failing to quell the growing unease among businesses.

While the UK economy managed a slight 0.1% growth in the final quarter of 2024, the Bank of England recently halved its forecast for economic growth in 2025 to 0.75%, signaling a growing concern about the overall economic outlook.