Businesses have made an eleventh-hour plea to Rishi Sunak to help with rising costs and scrap his planned national insurance rise, which economists have warned could wipe out £24 billion of economic growth over the next decade.
Before the chancellor’s spring statement on Wednesday, a survey of 1,200 businesses by Lloyds Bank found almost four in ten firms put help with energy bills and rising costs at the top of their wish list for government support.
As inflation hits the highest levels since 1992, more than a quarter of firms are worried about increasing costs for their goods and services and one in ten said they would consider scaling back operations.
A separate survey of 730 businesses employing about 9,000 people found that nine out of ten employers want the government to scrap its 1.25 percentage point rise in national insurance, which is planned for next month.
Victoria Short, chief executive of Randstad UK, part of the multinational recruitment company behind the survey, said: “A typical small business with around 50 employees could end up paying an extra £10,000 to £20,000 every year. This will cause businesses to employ fewer people.”
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Research by Europe Economics, a consultancy, for Taxpayers’ Alliance, which modelled the impact of the planned national insurance rise on growth, found that it could result in a 0.76 per cent, or £24 billion, reduction in economic growth over 10 years.
It also found that the UK will lose £6 billion of investment and see wages reduced by £5 per week more than they would have been without the tax rise. As a result, two thirds of the amount expected to be raised by the tax rise could be lost through lower growth, according to the research.
John O’Connell, chief executive of the Taxpayers’ Alliance, said: “Hiking national insurance will not only hit people’s pockets, but stifle the wider economy too. Bumper growth is what we need to tackle the colossal cost of Covid, not tax hikes which will see jobs and investment stall.”
Sunak told The Mail on Sunday that he had asked Treasury officials to set up a cost-of-living unit to scrutinise all new policies for their impact on public finances. He told the BBC yesterday that he would help “where we can make a difference”.
To assist with rising costs, more than a third of businesses surveyed by Lloyds called for tax holidays or tax incentives, about a quarter asked for grants to cover rising energy expenses, and a similar proportion said that they wanted to see the introduction of measures to support investment in energy saving measures to help tackle increasing costs.
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Priorities for businesses after help with rising costs were a reduction in VAT, cited by three in ten companies, and funding to help create new jobs and develop skills, called for by about a fifth of companies.
