The UK’s cost stack is choking business growth
Much of the UK has faced a summer of sweltering temperatures as the country has
bounced 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 profit is made the list of costs mounts up for businesses. In the
last 10 years we’ve seen increases in minimum wage, employer National Insurance,
business rates, employment rights, the apprenticeship levy, climate levies, IR35
changes, VAT thresholds and packaging taxes – to name just a few. This isn’t a
party-political issue, policy choices from successive governments have piled cost
after cost on British business.
Last month, I visited Lancashire to meet some of our amazing Chamber members.
Whether they were manufacturers, construction firms, retailers, or in the hospitality
sector, the business all told the me the same story. Cost pressures are damaging
investment and recruitment. One business told me they took on 25 apprentices last
year. This year they are taking on just one. From my travels across the UK, I know
that isn’t a unique story.
We need to be up front about the cost pressures. That is why the British Chambers
of Commerce has launched a new Cost Stack Calculator, in the pages of this
newspaper, in the run up to the budget. By using the online tool businesses can
quickly find out how much how much domestic policy-driven costs have increased for
them over the past decade. The results are stark.
Our modelling shows that for a typical SME employing 50 people with turnover of
£5m, the cost stack from government policies has risen by more than 70% in the
past 10 years.
This is not about one tax rise or one policy decision, it is about the cumulative impact
of them all. For businesses, 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.
Our latest survey of 4,700 businesses from across the UK shows only 17% of firms
have increased investment in the last three months. That’s the lowest level since the
pandemic, and a clear sign of the cost stack impact.
Andy Burnham has made a start in reducing costs for firm with a welcome business
rates cut for pubs, clubs and music venues in England from January next year. But
we urgently need action which will help reform business rates for all sectors not just
some.
Businesses resilience alone will not deliver the investment-led growth this country
needs. More and more businesses I speak to are asking whether it is all worth it.
Government must give firms the confidence and capacity to carry on, invest and
grow.
We need policymakers to stop adding to the cost stack and start taking layers away.
October’s budget will be a pivotal moment and our message is simple. Back
business. Cut costs. Deliver growth.
Use the BCC’s calculator to see how the cost stack has increased for your
business – visit https://www.britishchambers.org.uk/cost-stack-calculator/
Shevaun Haviland is Director General of the British Chambers of Commerce