British Businesses Brace for Tax Hike Impact as Confidence Wanes
Many British employers anticipate price increases and workforce reductions in response to government-mandated tax hikes, according to surveys released Monday.
The Chartered Institute of Personnel Development (CIPD) revealed that 90% of employers believe Finance Minister Rachel Reeves' decision to raise payroll taxes will increase employment costs. Among this cohort, 42% intend to raise prices, while 32% plan to downsize via redundancies or reduced hiring.
The Federation of Small Businesses (FSB) conducted a separate survey, indicating that confidence among its members plunged to its lowest level since the pandemic's onset in 2020.
These surveys align with other indicators showing a steep decline in business optimism following Reeves' October budget. CIPD CEO Peter Cheese described the drop in employer sentiment as the most significant in a decade, excluding the pandemic.
"Planned changes to employment costs have eroded employer confidence, and employment indicators point in the wrong direction," stated Cheese.
The FSB survey indicated that approximately one-quarter of small businesses anticipate a contraction in their operations.
Tina McKenzie, policy chair for the FSB, stressed the urgency of the government's growth initiatives, given the "fourth-quarter blues" reported by small firms.
Reeves defended her tax hikes as a necessary measure to stabilize public finances and fund essential services and investments.
Despite a modest 0.1% GDP growth in the last quarter of 2024, the Bank of England recently revised its 2025 growth forecast down to 0.75%.