More than half of British businesses plan to raise prices in response to Labour’s £25bn National Insurance raid, a Bank of England poll revealed yesterday.
The figures provide the latest evidence of how firms are scrambling to respond to the tax hike.
They come as the boss of Marks & Spencer said it would be a challenge, revealing that the high street giant would have to rethink its recruitment and investment plans after the shock increase and would aim to pass on ‘as little as possible’ to customers.
Shares in M&S and other retailers fell yesterday amid warnings of economic uncertainty ahead.
The Bank of England decision maker panel – a survey of more than 2,000 firms carried out last month – showed 54 per cent expected to put up prices in response to the NI hike.
It also found that 41 per cent planned to reduce employee wages, flying in the face of Rachel Reeves’s claim that the increase would not affect workers’ pay slips.
And 53 per cent say they will reduce their number of employees while 64 per cent said they would take a hit to profits.
It comes after the Chancellor stunned businesses by announcing in her Budget in October last year that the employer rate of national insurance would rise from 13.8 per cent to 15 per cent. At the same time, the salary threshold for having to pay employer NI was reduced from £9,100 to £5,000.
More than half of British businesses plan to raise prices in response to Labour’s £25bn National Insurance raid, a Bank of England poll revealed yesterday
The Bank of England decision maker panel – a survey of more than 2,000 firms carried out last month – showed 54 per cent expected to put up prices in response to the NI hike
The change has had a major impact on retailers, who employ many lower paid and part-time staff.
A forecast from the British Retail Consortium yesterday predicted that food prices would rise by 4.2 per cent later this year as firms grapple with higher costs.
M&S, which has previously revealed that it will take a £120 million hit as a result of the Budget – half from the NI hike and the rest from the increase in the minimum wage – outlined the pressure it faced as it delivered an update on recent sales yesterday.
Boss Stuart Machin said the company had been forced to ‘rework’ its plans for coming years as a result of the NI hike, which it ‘didn’t plan’ for.
Mr Machin said he did not expect this to mean ‘big job losses’.
But he added: ‘Does it make us look at how we recruit? Of course it does, and that does mean we have to think about where we invest.’
Meanwhile Tesco, Britain’s biggest supermarket, confirmed a £250 million impact from the NI hike alone as it published trading figures.
Chief executive Ken Murphy said the company would ‘do our very best’ to reduce the impact on prices.
M&S boss Stuart Machin said the company had been forced to ‘rework’ its plans for coming years as a result of the NI hike, which it ‘didn’t plan’ for
Tesco said it was not planning to make changes to its workforce or hiring plans.
And high street bakery chain Greggs has raised the prices of sausage rolls, coffee and doughnuts in the face of increased costs.
The price of a Greggs sausage roll has gone up by 5p to £1.30 having been just £1 as recently as 2022.
Chief executive Roisin Currie said the company was facing higher costs following the rise in the minimum wage and increase in national insurance contributions announced in the Budget.
‘We have had to pass a minimum amount of price rises onto customers but we work hard to protect as many prices as we can,’ she said.