UK firms defy tax hikes with plans to boost hiring: survey
UK BUSINESS confidence rose this month to its highest in almost a decade, with an increased majority of firms planning to hire more staff in the coming year despite Chancellor of the Exchequer Rachel Reeves’ tax hikes, a survey found.
More than 80 per cent said sharp increases to payroll taxes and the minimum wage that took effect in April would have only a limited impact on their staffing plans, the Lloyds Business Barometer showed.
Hiring intentions rose for a fourth month, with 62 per cent of businesses planning to add workers over the next 12 months.
Business optimism rose 2 percentage points to 54, the highest since November 2015, according to the poll of 1,200 firms carried out in the first two weeks of August. A gauge of trading prospects also improved to reach decade highs.
The more positive outlook was accompanied by an increase in the proportion of firms intending to raise prices and deliver inflation-busting pay rises. Almost one in four now expect to increase wages by 4 per cent, suggesting companies are passing on higher employment costs to their customers rather than their workers.
The survey provides evidence that businesses are coping with the £26-billion (S$45 billion) increase in payroll taxes and a near 7 per cent hike in the minimum wage announced in Labour’s first budget. It chimes with S&P Global’s PMI survey showing the private sector rising at the strongest pace in a year.
BT in your inbox
Start and end each day with the latest news stories and analyses delivered straight to your inbox.
The numbers will provide a boost for Reeves, whose revenue-raising efforts have been criticized for stifling growth and driving inflation. However, they are likely to fuel worries of persistent price pressures among Bank of England policymakers as they debate the pace of future interest-rate cuts.
“This continued upward trend in business confidence suggests UK firms remain optimistic about their own trading prospects while there is a modest cooling of confidence in the wider UK economy,” said Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking.
“Wage expectations have seen a notable shift this month, but it remains to be seen whether this signals the start of a sustained trend or a temporary uplift.”
Lloyds said business confidence edged higher despite a drop in economic optimism.
Some 35 per cent of employers are set to increase pay by 4 per cent or more, up 10 points from a month ago. The share of firms planning to put up prices in the coming year rose to 67 per cent in August, while only 2 per cent are expecting price declines. BLOOMBERG
Share with us your feedback on BT's products and services
