British companies are facing a “cost of business crisis” as a string of controversial government policies have pushed up the average firm’s expenses by 70 per cent in a decade, one of the country’s largest industry bodies has said.
A typical firm with 50 staff is now paying roughly £827,000 more a year than they were in 2016 as a direct consequence of policy decisions made by the government, according to a new business cost calculator launched by the British Chamber of Commerce (BCC).
Researchers at the business group said around a quarter of the total increase in business costs came from former Chancellor Rachel Reeves’ decision to hike national insurance contributions for employers at her first Budget in 2024.
The tax hike, which aimed to raise an extra £25bn in government revenue each year, included raising the rate of national insurance contributions for companies from 13.8 per cent to 15 per cent and lowering the salary threshold at which firms start paying the levy to £5,000.
The BCC said Reeves’ raid in 2024 marked an “inflection point” and firms were now facing a “cost of business crisis.” “This mounting cost burden has priced many firms out of growth,” said David Bharier, deputy director at the BCC.
Other policies that have added to the rising bill for business include a higher minimum wage, which was raised by successive Tory and Labour governments, and pension auto-enrolment.
The BCC’s cost calculations only take into account domestic policy costs. The impact of tariffs, higher inflation, Brexit and global conflicts are not covered in calculations, indicating that the cost of running most businesses has risen far higher than 70 per cent.
The BCC has shared its calculator with firms as the private sector looks to press new government ministers on business costs ahead of the Labour Party conference and a crucial Budget on 28 October.
After being made Labour leader, Prime Minister, Andy Burnham promised to be “pro-business”. Chancellor John Healey also said providing “breathing space” to businesses would become a priority.
Bharier said that every policy introduced by Burnham and Healey should pass a ‘growth delivery test’ and have a positive impact on businesses’ ability to “invest, innovate, or expand”.
The upcoming budget could prove to be difficult for Burnham and Healey, who looked poised to raise taxes to restore the partly-eroded fiscal headroom and deliver on a host of spending pledges. Capital Economics’ deputy chief UK economist said there could be tax hikes “almost as big” as those seen last year.
Meanwhile, Sir Richard Branson, entrepreneur, business magnate and founder of the Virgin Group of companies, has called on policy makers to do more to support and “champion” British entrepreneurs.
Branson, who launched his iconic business selling records in 1970, said the UK must go further to create an environment where entrepreneurs want to set up and run a business. London has always been a city brimming with possibility, fuelled by its diversity, creativity and willingness to embrace new ideas.
Sir Richard said: “We need to do more to champion anyone willing to have a go at starting a business. It’s really tough trying to build a business from scratch. Maybe that’s why it’s so important to create an economic environment where innovators with imagination can be helped to survive and thrive.” Research from Virgin’s charity, Virgin Startup, reveals that a large majority of founders “do not believe Westminster listens to their concerns.” Branson added: “This cannot be ignored. Entrepreneurs need as much support as possible to turn bold ideas into great businesses that hopefully end up employing lots of people. Societies benefit when entrepreneurs succeed. We must give every founder the best chance to flourish.”
Oman Observer is now on the WhatsApp channel. Click here
