Businesses facing pressure to raise prices amid soaring costs

A “direct tax on job creation” could weaken the economy and employers’ desire to recruit, warns a Bristol business representative.

A recent survey revealed 43 per cent of companies in the region are facing pressure to raise prices amid an increase in National Insurance contributions on top of soaring energy bills, hike in inflation and rise in import prices.

Commenting on the findings, the director of policy for Business West Matt Griffith said the National Insurance increase of 1.25 per cent is another added pressure during a time when many companies are at the limit of taking on further costs.

It comes as the Office for National Statistics reports a decline in UK economic growth with gross domestic product up by just 0.1 per cent in February, down from a monthly growth of 0.8 per cent in January and lower than anticipated by economists.

Services growth, mainly driven by the tourism sector, was the main contributor to the slight growth while production output fell by 0.6 per cent in February.

According to the Business West survey, manufacturers in the South West have reported higher inflationary pressures to raise wages to retrain and recruit staff.

The boss of a Bristol-based manufacturing firm commented: “With costs of everything going up, remaining competitive whilst also covering overheads and making profit is much more difficult.”

Griffith said: “During 2021 and the start of 2022, we have already seen strong inflationary pressures. This was partly due to labour market shortages, with firms struggling to recruit and retain; another considerable part was in input inflation, driven by rising import costs with global supply chain constraints and Brexit. Covid also left many firms in a fragile situation and surging energy prices haven’t helped confidence.

“The National Insurance hikes are another added pressure on top of firms during a time when many at are the limit of taking on further costs. At a point when we should be looking to strengthen the recovery, a direct tax on job creation could weaken the economy and businesses’ desire to take people on.”

Commenting on the ONS report, he added: “While economic output marginally strengthened in February, the significant slowdown in growth shown in the ONS report, combined with the pressure on firms to rise prices, shows the UK economy was faltering even before the impact of Russia’s invasion of Ukraine.

“Firms are now being hit with rising supply chain and wage inflation, surging energy bills, and higher taxes which will damage UK output including consumer spending.

“The government must provide urgent financial support to businesses by expanding the energy bills rebate scheme, taking into consideration small firms and particularly energy-intensive businesses.”

Main photo: Business West

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