Britain’s businesses are being strangled by a relentless accumulation of policy-driven costs that have built up over the past decade, leaving little room for growth.
Before a single pound of profit is made, firms face a mounting list of expenses that successive governments have steadily added to over many years.
Increases in minimum wage, employer National Insurance, business rates, employment rights, the apprenticeship levy, climate levies, IR35 changes, VAT thresholds, and packaging taxes have all compounded the pressure on British firms.
This is not a party-political issue, as policy choices from both Conservative and Labour governments have piled cost after cost onto British business over the years.
Shevaun Haviland, Director General of the British Chambers of Commerce, visited Lancashire recently and heard the same story from manufacturers, construction firms, retailers, and hospitality businesses alike.
Cost pressures are directly damaging investment and recruitment decisions, with one business telling Haviland it had taken on 25 apprentices last year but just one this year.
Modelling by the British Chambers of Commerce shows that for a typical SME employing 50 people with a turnover of £5 million, the policy-driven cost stack has risen by more than 70% over the past decade.
The British Chambers of Commerce has launched a Cost Stack Calculator, allowing businesses to assess how much domestic policy-driven costs have increased for them over the past ten years.
A BCC survey of 4,700 businesses across the UK found that only 17% of firms had increased investment in the last three months, the lowest level recorded since the pandemic.
Every pound spent absorbing higher costs is a pound that cannot go into buying a new machine, hiring a new recruit, investing in new technology, or expanding into a new export market.
Andy Burnham has made a start in reducing costs for firms with a welcome business rates cut for pubs, clubs, and music venues in England, but Haviland argues that reform must extend to all sectors.
“Businesses resilience alone will not deliver the investment-led growth this country needs,” Haviland warned, noting that more firms are beginning to question whether continued operation is worthwhile.
The BCC’s message ahead of the budget is direct and unambiguous: “Back business. Cut costs. Deliver growth.”
Policymakers must stop adding layers to the cost stack and instead begin removing them before business confidence deteriorates further and investment opportunities are lost permanently.