Finance
UK firms brace for hit from tax hikes, surveys show
Published by Global Banking and Finance Review
Posted on February 17, 2025
2 min readLast updated: January 26, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on February 17, 2025
2 min readLast updated: January 26, 2026
UK businesses plan price hikes and job cuts due to tax increases, with small business confidence at a five-year low, surveys show.
(Reuters) - Many British employers intend to raise prices and cut headcount because of the government's tax increases on business, with confidence among small businesses falling to a five-year low, surveys showed on Monday.
The Chartered Institute of Personnel Development (CIPD), a professional human resources sector body, said nine out of 10 employers thought finance minister Rachel Reeves' decision to raise payroll taxes from April would push up employment costs.
Of this group, 42% said they intended to raise prices and 32% said they intended to reduce headcount either through redundancies or recruiting fewer workers.
A separate survey from the Federation of Small Businesses (FSB) showed confidence among its members fell in late 2024 to its lowest level since the first quarter of 2020 when the COVID-19 pandemic hit Britain.
The surveys echoed other indicators that have shown a sharp drop in business confidence since Reeves' October 30 budget.
CIPD Chief Executive Peter Cheese said the drop in employer sentiment was the biggest in 10 years apart from during the pandemic.
"Employer confidence has been impacted by planned changes to employment costs, and employment indicators are heading in the wrong direction," Cheese said.
The FSB survey showed around a quarter of small companies expect to see a contraction in the size of their business.
"The fourth-quarter blues reported by small firms underline how urgently the government's growth push is needed," Tina McKenzie, the FSB's policy chair, said.
Reeves has said her tax increases were a one-off move to put the public finances on a stable footing while raising funds for services and investment.
Britain's economy unexpectedly grew by 0.1% in the final quarter of last year, official figures showed last week but earlier this month the Bank of England halved its forecast for economic growth in 2025 to 0.75%.
(Reporting by Andy Bruce; Editing by William Schomberg)
Many British employers plan to raise prices and cut headcount due to the government's tax increases on business, with 42% intending to raise prices and 32% planning to reduce headcount.
Confidence among small businesses has fallen to a five-year low, with a separate survey indicating that confidence among Federation of Small Businesses members dropped to its lowest level since early 2020.
The CIPD reported that the drop in employer sentiment is the largest in ten years, apart from during the pandemic, indicating significant concern over planned changes to employment costs.
The FSB survey showed that around a quarter of small companies expect to see a contraction in their business size, highlighting the urgent need for government intervention to stimulate growth.
Finance minister Rachel Reeves stated that the tax increases are a one-off measure aimed at stabilizing public finances while raising funds for essential services and investment.
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