Key facts
- British companies face a "cost of business crisis" due to government policies.
- Average business expenses have increased by 70% over the past decade.
- A typical mid-sized firm now pays approximately £827,000 more annually.
- Former Chancellor Reeves' decision to increase national insurance contributions accounts for about a quarter of the rise.
- Other contributing factors include higher minimum wages and auto-enrolment in pension schemes.
- The British Chambers of Commerce (BCC) has launched a calculator to help firms assess these cost increases.
British companies are facing a significant "cost of business crisis," with average expenses escalating by 70% over the past decade due to government policies, according to the British Chambers of Commerce (BCC). A new business cost calculator developed by the BCC reveals that a typical mid-sized firm is now paying approximately £827,000 more annually compared to 2016, directly as a result of domestic policy decisions.
The BCC attributes around a quarter of this substantial increase to former Chancellor Rachel Reeves' decision in her 2024 budget to raise national insurance contributions for employers from 13.8% to 15% and lower the salary threshold for the levy to £5,000. The BCC described this move as an "inflection point" that has led to a "cost of business crisis," hindering business growth and investment.
Other policies contributing to the rising operational costs for businesses include increases in the minimum wage and mandatory auto-enrolment in pension schemes, requiring employers to contribute at least 3% of earnings. These factors, along with others, constitute the "overwhelming bulk of the stack" for firms with around £5 million in turnover and 50 employees.
The BCC has shared its cost calculator with member firms as they prepare to lobby new government ministers on business costs ahead of the Labour Party conference and an upcoming Budget on October 28. Labour leaders Andy Burnham and Chancellor John Healey have pledged to be "pro-business" and provide "breathing space" to companies. However, economists from Capital Economics anticipate that the government may implement tax hikes, potentially as significant as those seen previously, to restore fiscal headroom, though the burden might shift more towards households.
The BCC's calculations specifically exclude external factors such as tariffs, higher inflation, Brexit, and global conflicts, suggesting that the actual increase in business operating costs is likely even higher than the reported 70%.