THE BUSINESSES at the backbone of the UK economy are increasingly worried inflation and supply chain issues will be more damaging to their prospects than the Covid-19 pandemic was, according to a closely watched sentiment tracker.
Accountants BDO’s survey of medium-sized businesses suggests economic headwinds are squeezing both margins and wages – with tax hikes causing additional frustration.
A third say they have paused or reduced hiring as a direct result of the increase in national insurance contributions required as part of the social care and health levy.
More than a quarter are raising prices as a result of the additional pressures on their bottom line, a move which risks entrenching inflation into the economy for longer. Most economists expect inflation to come close to or top 10 per cent in October, when energy prices increase for consumers as a result of a higher price cap brought in by Ofgem.
A fifth have paused investment decisions due to economic fears.
“This is a deeply troubling picture for the UK’s mid-sized businesses, who have spent over two years since the start of the pandemic operating in survival mode. Now, mounting inflation and the cost of living crisis is once again preventing them from prioritising long-term recovery, especially by putting a pause on much-needed investment,” said Ed Dwan, a partner at BDO, yesterday.
“For many, the rise in National Insurance contributions has been a tipping point – resulting in an increase in salaries that could well exacerbate inflation and the pressures facing businesses right now.”