More than half of UK companies plan to raise prices by early April, according to research, which found business confidence has slumped since the budget.

A survey of more than 4,800 firms found that 55% of them expect prices to increase in the next three months, up from 39% in a similar poll in the second half of 2024.

The research, by trade group the British Chambers of Commerce, comes after Labour announced an increase in taxes related to employing people in the October budget.

Chancellor Rachel Reeves said companies will have to pay more in national insurance contributions, while also raising the minimum wage.

The tax increase is designed to help pay for improvements to services like the NHS and public transport.

But it has come in for criticism from some business groups, who say it is making it harder for them to hire people.

Three-quarters of companies said the cost of employing people is their main cost pressure.

The survey also found business confidence has fallen since the spending statement, with 49% of firms saying they expect turnover to grow in the next year, down from 56% last year.

The group’s director-general, Shevaun Haviland, called the situation ‘a pressure cooker of rising costs and taxes’.

‘Firms of all shapes and sizes are telling us the national insurance hike is particularly damaging,’ she said.

‘Businesses are already cutting back on investment and say they will have to put up prices in the coming months.’

Raising prices would increase the rate of inflation, which fell sharply from record highs in 2022 but rose again in the final months of last year.

Inflation is significant because it is a major influence on where the Bank of England sets the base interest rate.

High inflation usually makes it harder for the Bank’s policymakers to cut interest rates, which in turn means mortgage rates come down more slowly.

The survey also puts more scrutiny on the strength of the economy, after disappointing growth figures in December.

Labour has made boosting the economy its main priority since winning the election last summer.

But official data showed the economy had zero growth between July and September, and that it contracted during October.

source: PA

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