UK companies jittery about rise in labour costs and Trump tariffs: survey
BRITISH companies face a challenging 2025, the British Chambers of Commerce (BCC) said on Wednesday (Dec 4) with an increase in employment costs and potential tariffs on exports likely to hit their investment and trading prospects.
The possibility of higher trade tariffs, as proposed by incoming US president Donald Trump, and global conflicts are expected to weigh down on trade, on top of post-Brexit trade barriers with the European Union (EU), the BCC said.
Trump has floated blanket tariffs of 10 per cent to 20 per cent on nearly all imports when he returns to the White House in January.
“With fears of a tariff war and continued trade barriers with the EU, international trade will be challenging for many companies,” the BCC’s head of research David Bharier said.
The BCC revised down its forecasts for net trade which it now expects to contract by 1.4 per cent in 2025 and 1.5 per cent in 2026.
Earnings growth is expected to slow next year, mainly reflecting increased costs including the higher social security contributions that will be paid by employers and a 6.7 per cent rise in the minimum wage, both of which come into effect in April.
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“The knock-on effect of rising business costs are likely to restrict wage growth in the short term and employment, as companies struggle to pass on costs and boost recruitment,” Bharier noted.
The Bank of England (BOE) is closely watching wage growth as it considers further interest rate cuts which governor Andrew Bailey has said are likely to be gradual given the inflation pressures still in the British economy.
Business investment is forecast to grow by just 0.9 per cent next year, compared to a previous forecast of 1.4 per cent growth. It is expected to grow by 2.1 per cent in 2026. The downgrade was exacerbated by the rise in social security contributions paid by employers, the BCC said.
Finance Minister Rachel Reeves announced the increase in her Budget in October.
The BCC now expects Britain’s economy to grow 0.8 per cent in 2024, a downgrade from a previous forecast of 1.1 per cent. But growth was revised up for the coming two years – with expansions of 1.3 per cent expected in 2025 and 1.5 per cent in 2026, higher than previous estimates of 1.0 per cent and 1.1 per cent respectively, echoing upgrades by other forecasters after Reeves announced increases in public spending.
The BCC said that the social security rise would have a “small impact” on the growth forecasts.
The Organisation for Economic Cooperation and Development on Wednesday trimmed its forecast for British economic growth this year to 0.9 per cent from 1.1 per cent, but raised its 2025 projection to 1.7 per cent from 1.2 per cent previously.
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