British Chambers of Commerce says firms are cutting investment plans as tax and employment costs continue to rise
British businesses have cut their investment plans to the lowest level since the pandemic, with some firms warning they are being “taxed out of existence” as higher taxes and rising employment costs continue to weigh on confidence.
New figures from the British Chambers of Commerce (BCC) show just seventeen per cent of businesses planned to increase capital investment during the latest quarter, down from twenty one per cent in the previous three months.
It is the weakest level of investment intentions since the economy emerged from the Covid pandemic and reflects continued caution over future growth.
The BCC said rising tax bills and higher operating costs are reducing firms’ willingness to commit money to expansion projects.
Since Labour won the 2024 General Election, employers have faced an additional £25billion in National Insurance contributions alongside increases to the national living wage, adding to business costs.
The survey suggests those measures are continuing to affect confidence across a range of sectors.
One business owner told the BCC they were “being taxed out of existence.”
Another respondent said their company was suffering “from higher taxation, increased labour and energy costs that are stifling growth and investment.”
The survey, which gathered responses from four thousand seven hundred and forty four businesses, indicates that investment remains one of the weakest areas of the United Kingdom economy, continuing a trend seen since the Brexit referendum in 2016.
The findings come as employers continue to call for policies that encourage growth and ease financial pressures.
David Bharier, deputy director of economics and insights at the BCC, said Government policy must pass a “growth delivery test.”
He said: “Each proposal should start from the question of exactly how it will cause firms to increase investment, exports, hiring or expansion.”
He added that businesses want greater certainty to support long term planning.
The report also follows comments from Greater Manchester Mayor Andy Burnham, who suggested there may be scope for changes within Labour’s tax commitments.
Mr Burnham has backed proposals to reduce VAT for hospitality businesses and reform the business rates system, arguing the measures could support struggling firms.
Britain has experienced relatively weak productivity and economic growth since the 2008 financial crisis, with economists frequently pointing to low levels of public and private investment as a contributing factor.
The BCC survey found inflation remains the biggest concern for businesses, with sixty six per cent of respondents citing rising prices as their primary worry during the latest quarter.
Oil prices have fallen below the levels seen before the recent conflict involving Israel and Iran, while the Office for National Statistics (ONS) reported annual inflation of two point eight per cent in May, lower than many economists had expected.
Responding to the figures, a Treasury spokesman defended the Government’s economic strategy.
The spokesman said: “This Government has the right economic plan, with business investment at three point six per cent above pre election levels, lower than expected inflation and the fastest growth in the G7 for the start of this year.”
Ministers say their policies are designed to support long term economic growth while balancing the public finances, although business groups continue to argue that rising tax and employment costs are limiting investment and expansion.
