Budget tax hike bursts business confidence

West & North Yorkshire Chamber of Commerce today publishes research showing that business sentiment across the region has declined sharply, with sales, recruitment, investment and confidence all having plummeted in the final quarter of 2024.

The Chamber’s Quarterly Economic Survey for the final quarter of 2024 shows that increases in Employer national Insurance Contributions and the minimum wage announced in the Autumn Budget has led to many businesses revising their profitability projections downward, as well as placing any plans for investment or hiring on hold.

Taxation is now by far and away the principal cost pressure facing businesses in the region, with labour costs and inflation also high on business leaders’ agendas.

The manufacturing sector in particular fared worst, with sales, orders, recruitment and investment now at the lowest level since the height of the pandemic.

Amanda Beresford, chair of West & North Yorkshire Chamber of Commerce, said: “The results of the latest Quarterly Economic Survey are not what we wanted to start the new year with.  

“Business confidence declined in the final three months of 2024, with employers reporting declining sales, reduced hiring intent, expressing a shrinking appetite for investment and reducing forecasts when it comes to profits.  

“Indeed, one needs to travel back the hight of the pandemic to see such poor levels of sentiment among businesses.  

“Although firms have become accustomed to uncertainty over the past eight years, they still do not have the stable platform upon which sustained economic growth can be achieved.  

“Let us hope optimism returns in the months ahead and that we finally as a country get back to growth.”   

After seeing their overheads increase, the numbers of business leaders who expect their profits to grow in Q1 of 2025 has fallen considerably, most notably for manufacturers whose optimism fell to the lowest level since the pandemic.

After a decent period of performance during 2024, sales volumes for manufacturers fell off a cliff edge, with order books also at a four-year low. Service sector firms, however, improved their sales performance to the highest level in two years, although order books remain flat.

Both service sector firms and manufacturers saw a marked decline in their overseas sales, with order books also in decline.  

On hiring intent, we are again back to pandemic levels.  With sudden sharp rises in the cost of doing business, it seems investing in new staff is currently off the table for many employers. 

When it comes to investment, any plans employers may have been harboring for putting money capital investment look to be on hold with the sharpest decline in investment plans in four years.

The appetite for allocating money for new capital investments looks to have evaporated.

The one ray of light is that employers in the manufacturing sector are seeing a rising appetite for training staff, perhaps indicative of the fact that hiring intent has plummeted.

Taxation comes as by far the number one external pressure issue facing firms in the region, and by some considerable distance. The already generationally high rates of tax were exacerbated by the hike in employee National Insurance contributions, putting tax levels for firms at eye-watering levels.

Elsewhere, labour costs top the list of cost pressures, again something which the Budget’s increase in the minimum wage will have contributed to.

The number of manufacturers anticipating price increases rose by 27 per centage points while service sector firms saw a 17 per cent increase.