The UK’s cost stack is choking business growth
Much of the UK has faced a summer of sweltering temperatures as the country hasbounced from one unrelenting heatwave to another. Businesses know all too well that unrelenting feeling. A decade of constant cost pressures from domestic policy decisions has been hugely damaging. It’s a cost stack is chocking business growth. Before a pound of [...]
The UK's cost stack is severely hindering business growth, as a decade of constant cost pressures from domestic policy decisions has had a hugely damaging effect on enterprises. Businesses face an ever-growing list of costs before they can even make a profit, including minimum wage increases, employer National Insurance contributions, business rates, employment rights, apprenticeship levies, climate levies, IR35 changes, VAT thresholds, and packaging taxes.
These policy choices from successive governments have piled cost after cost on British businesses, regardless of political affiliation.
During a recent visit to Lancashire, the British Chambers of Commerce met with various business members from sectors such as manufacturing, construction, retail, and hospitality. All reported that cost pressures are damaging investment and recruitment. One manufacturer, for example, reduced the number of apprentices they took on from 25 last year to just one this year.
This issue is not unique to Lancashire, as the BCC's Cost Stack Calculator reveals that for a typical SME employing 50 people with a turnover of £5m, the cost stack from government policies has increased by over 70% in the past decade.
The online tool allows businesses to quickly determine how much domestic policy-driven costs have risen for them over the last ten years. The results are stark, highlighting that for a typical SME, the cost stack has risen by more than 70% in the past ten years. This is not about a single tax rise or one policy decision; it is about the cumulative impact of all these costs.
For businesses, every pound spent on absorbing higher costs is a pound that cannot be invested in purchasing new machinery, hiring new employees, investing in new technology, or expanding into new export markets.
A recent survey of 4,700 businesses across the UK found that only 17% of firms have increased their investment in the last three months, the lowest level since the pandemic. This decline in investment is a clear sign of the cost stack's impact on businesses. While Andy Burnham's recent business rates cut for pubs, clubs, and music venues in England is a step in the right direction, more urgent action is needed to reform business rates for all sectors, not just some.
Business resilience alone will not lead to the investment-led growth this country requires. More and more businesses are questioning whether it is all worth it, and government must provide them with confidence and capacity to continue investing and growing. Policymakers must stop adding to the cost stack and start removing layers from it.
The October budget will be a crucial moment, and the British Chambers of Commerce urges policymakers to back businesses by cutting costs and delivering growth. To see how the cost stack has increased for your business, visit the BCC's Cost Stack Calculator at https://www.britishchambers.org.uk/cost-stack-calculator/.
Written by urgent.news from City AM's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
