More than half of UK businesses plan to raise prices in the next three months as they face mounting financial pressures, according to a major business group.

The British Chambers of Commerce (BCC), which surveyed nearly 5,000 companies, reported that business confidence has fallen to its lowest level in two years. Nearly two-thirds of firms expressed concerns over tax increases, particularly the upcoming rise in employers' National Insurance contributions (NICs) in April.

A Treasury spokesperson defended the changes, arguing that the Budget provides stability for businesses, with more than half of employers seeing either a cut or no change in their NIC bills.

However, price increases could fuel inflation, which remains a concern as many households struggle with the cost of living crisis.

Rising Costs and Inflation Concerns

The rate of inflation, which measures the pace of price increases, has fallen sharply from record highs in 2022 but rose in both October and November.

According to the BCC survey, conducted after the Budget:

• 55% of businesses expect to raise prices in the next three months, up from 39% in the previous survey.
• 63% of firms cited taxes as a top concern—the highest level since 2017.

Shevaun Haviland, director general of the BCC, warned that businesses face difficult choices.

"There’s only so much you can do. You either raise prices, absorb the costs—leaving you with less money to invest—or cut jobs and recruitment. It’s really tough."

A separate S&P Global survey found that in December, the UK services sector cut jobs at its fastest pace in nearly four years, with one in four firms reporting a decline in payroll numbers.

Tim Moore, economics director at S&P Global Market Intelligence, noted that businesses are reducing hiring due to higher employment costs and subdued demand.

Business Confidence and Economic Growth

Concerns over economic growth have intensified following disappointing official data released before Christmas. The UK economy showed zero growth between July and September and contracted in October.

While these figures were seen as a setback for the Labour government, a KPMG report predicts that economic growth will accelerate this year. The firm expects GDP to grow by 1.7% in 2025, up from 0.8% in 2024, as consumer spending strengthens due to higher wages and lower interest rates.

However, KPMG warned that stronger growth could prolong inflation as businesses pass higher tax costs onto consumers.

Industry Reactions: Businesses Face Tough Choices

Many businesses are already struggling with the impact of rising taxes and wage costs.

Kevin McNamee said businesses had been "shocked" by the changes to national insurance in the Budget

Kevin McNamee, CEO of Denroy Group, a plastic goods manufacturer in Northern Ireland, said that higher employer NICs and the National Living Wage increase will cost the company hundreds of thousands of pounds.

"It's a really significant hit. Some price increases are inevitable to cover these costs."

To offset rising expenses, businesses are focusing on productivity and reducing headcount.

"The priority now is improving efficiency, limiting hiring, and keeping costs under control," McNamee said.

He also noted that businesses were "shocked" by the national insurance increase, adding:

"It's hard to see how the Budget encourages businesses to invest and grow. In many ways, it feels like we've had our pockets picked."

Mixed Views in the Business Community

Not all industries share the same concerns.

Dame Irene Hays, owner and director of Hays Travel, said she had not seen a decline in business confidence within the travel sector.

She reported that bookings were up 22% so far this year and remained optimistic despite the rising costs.

"We've been around for 45 years and have navigated different governments and economic conditions. There are always cost pressures, and it's about managing them carefully."

The Budget and Business Impact

The autumn Budget, delivered by Chancellor Rachel Reeves, introduced:

• An increase in employer NICs from 13.8% to 15% from April 2025.
• A National Living Wage rise from £11.44 to £12.21 per hour.

The BCC survey, conducted from 11 November to 9 December, found that:

• 91% of respondents were small or medium-sized enterprises (SMEs).
• 49% of businesses expected sales to increase in the next year, the lowest confidence level since late 2022.

Haviland described the findings as deeply concerning:

"The worrying reverberations of the Budget are clear to see. Business confidence has slumped in a pressure cooker of rising costs and taxes."

Government’s Response

A Treasury spokesperson defended the Budget, stating:

"We delivered a once-in-a-parliament Budget to provide stability and reset the economy. More than half of employers will see a cut or no change in their National Insurance bills."

The government remains committed to restoring financial stability, creating conditions for economic growth, and supporting businesses through investment and reform.

However, with rising costs, tax increases, and a fragile economy, many businesses are bracing for tougher months ahead.