Key facts
- Policy-driven costs for UK businesses have risen by over 70% in the past decade.
- A typical mid-sized firm now faces annual policy-driven costs of approximately £1.98 million.
- Economists predict potential tax increases worth up to 0.8% of GDP in the upcoming Budget.
- Labour's manifesto restricts hikes to income tax, employee National Insurance, corporation tax, and VAT.
- Individuals and households may face tax changes on pensions, inheritance, or capital gains.
UK businesses are facing a significant increase in operational costs, with policy-driven burdens rising by over 70% in the last decade. A typical mid-sized firm now incurs approximately £1.98 million annually in such costs, up from £1.16 million in 2016. This figure encompasses minimum wage hikes, employer National Insurance, energy levies, pension contributions, business rates, and regulatory compliance, excluding general inflation or corporation tax.
Economists at Capital Economics suggest that the upcoming Budget could see tax increases worth up to 0.8% of GDP, potentially funding Prime Minister Burnham's policy objectives. However, Labour's manifesto commitments preclude raising income tax, employee National Insurance, corporation tax, or VAT, which together represent 54% of government revenue. This suggests that other taxes may be increased, new ones introduced, or the tax base expanded.
While sector-specific levies on banking, energy profits, or digital services are possibilities, economists believe tax rises are more likely to fall on individuals and households. Potential areas include changes to pension tax, inheritance tax, and capital gains tax. Businesses are reportedly hoping to avoid further tax burdens, given the already substantial increase in their operating costs.