Over half of UK firms to raise prices, cut jobs due to tax hike

More than half of UK businesses plan to raise prices and reduce employment following Chancellor Rachel Reeves’ £26 billion payroll tax increase, according to a Bank of England (BOE) survey.

Published on Thursday, the survey revealed that 54 per cent of CFOs intend to pass the tax hike onto consumers through higher prices, while an equal proportion expect to cut jobs. The move, aimed at funding public services, has raised inflation concerns and may complicate the BOE’s rate-setting strategy.

Reeves’ October budget included a 1.2 percentage point rise in the national insurance rate for employers and a lower wage threshold for contributions. Nearly 40 per cent of CFOs said they would offer lower wages, and 59 per cent expected profit reductions.

The BOE has signalled uncertainty, weighing short-term inflation against potential long-term employment impacts.

The survey showed businesses anticipating a 3.7 per cent price increase over the next year, up from 3.5 per cent, with year-ahead inflation expectations at 2.7 per cent, above the BOE’s 2 per cent target.

Wage growth expectations remained at 4 per cent, well above levels that would support low inflation. This data, combined with the recent rate cuts, suggests that while the BOE plans to ease interest rates, caution will remain in response to ongoing price pressures.

Attribution: Bloomberg

Subediting: M. S. Salama