British businesses are being “taxed out of existence”, with the appetite to invest in major projects now weakest since the end of the Covid-19 pandemic, according to one of the UK’s biggest business groups.
The British Chambers of Commerce (BCC) said on Monday that the number of firms planning to increase investment fell to 17 percent in the past three months, down from 21 percent in the previous quarter, according to its latest Quarterly Economic Survey, the UK’s largest independent business survey.
The findings reveal how tens of billions of pounds in tax rises for employers, combined with a relentless rise in operating costs, have put the UK economy in dire straits since the 2016 Brexit vote.
Since Labor won the 2024 general election, businesses have received an extra $25 billion in national insurance, a bill that has already exceeded Treasury forecasts by some amounts, and a sharp increase in the minimum wage that has pushed labor costs up sharply.
The frustration among owner-managers is palpable. One business owner told the BCC they were “being taxed because they weren’t there”, while another said their company was suffering from “high taxes, rising labor and energy costs. [that are] hinder growth and investment.” This view is similar to previous BCC polling which found that many UK businesses were rethinking their plans as tax rises hit hard.
There are, however, signs of movement at the top of the government. Andy Burnham, widely seen as prime minister-in-waiting, has indicated that there is “room to maneuver” on taxation under the constraints of Labour’s election manifesto, which has ruled out increases in income tax rates, NICs and general VAT. He also supported the reduction of the hospitality VAT and the reform of the corporate tax.
David Bharier, deputy director of economics and information at the BCC, said government policy needed to pass what he called the “growth delivery test”. “Each proposal should start from the question of how it will cause firms to increase investment, export, hire or expand,” he said.
Britain is not alone in its problem. Growth across the G7 has slowed significantly since the global financial crisis in 2008, a negative economists attribute at least in part to a persistent lack of public and private investment.
Inflation, on the other hand, remains a major concern in boardrooms. Of the 4,744 businesses the BCC surveyed online, 66 per cent cited rising prices as their main concern last quarter, despite oil prices falling below pre-Middle East war levels and official figures from the Office for National Statistics showing annual inflation was lower than expected in May, at 2.8 per cent.
The Ministry of Finance, on the other hand, is still developing. One official said: “This government has the right economic plan, as business investment is more than 3.6 percent above pre-election levels, lower than expected and the rapid growth of the G7 earlier this year. The economy is in a strong position to face the cost of the war in Iran because of the chancellor’s decisions.”
For the small and medium-sized firms that form the backbone of the UK economy, however, the lower numbers tell a different story – and until the gap between Whitehall’s optimism and boardroom reality narrows, the investment the country desperately needs looks set to remain on hold.
