The UK's largest business lobby group has warned that British businesses are being "taxed out of existence" as the appetite to invest in major projects reaches its weakest point since the end of the Covid-19 pandemic.
The British Chambers of Commerce (BCC) has released its latest Quarterly Economic Survey, the UK's largest independent poll of business sentiment, which shows that the proportion of firms planning to increase investment slipped to 17 percent over the past three months, down from 21 percent in the previous quarter.
Tax rises on employers, combined with relentless increases in operating costs, have choked off the capital spending the UK economy has conspicuously lacked since the 2016 Brexit vote. The BCC reported that businesses have absorbed an additional £25 billion in national insurance contributions since Labour won the 2024 general election, a bill that has already overshot Treasury forecasts by some margin.
The frustration among owner-managers is palpable, with one business owner telling the BCC they were "being taxed out of existence," while another said their firm was suffering "from higher taxation, increased labour and energy costs [that are] stifling growth and investment."
However, there are signs of movement at the top of government, with a senior official signalling that there is "room for movement" on taxation within the constraints of Labour's election manifesto. The official also backed a VAT cut for hospitality and an overhaul of the business rates regime.
The BCC has called on the government to pass a "growth delivery test" for each proposal, asking how it will cause firms to increase investment, exports, hiring or expansion. The deputy director of economics and insights at the BCC said: "Each proposal should start from the question of exactly how it will cause firms to increase investment, exports, hiring or expansion."
Britain is far from alone in its predicament, with growth across the G7 slowing markedly since the 2008 global financial crisis. Economists attribute this to a persistent shortfall in both public and private investment.
The dominant worry in boardrooms remains inflation, with 66 percent of the 4,744 businesses surveyed by the BCC citing rising prices as their top concern over the past quarter.
The Treasury remains bullish, citing business investment at 3.6 percent above pre-election levels, lower than expected inflation, and the fastest growth in the G7 for the start of this year. However, for the small and medium-sized firms that make up the backbone of the UK economy, the numbers on the ground tell a different story.
Until the gap between Whitehall optimism and boardroom reality narrows, the investment the country so badly needs looks set to remain on hold.
