
Figures from the British Chambers of Commerce (BCC) show that labour costs are the biggest pressure for most firms, up from 66% in Q3 to 75% in Q4.
The hospitality industry was most likely to feel this pressure, with 87% of firms saying this was the biggest issue, followed by transport, construction and manufacturing.
Businesses told the BCC that the costs of the increased minimum wage and National Insurance rise announced in the Budget are affecting their decisions.
One medium manufacturing firm in the East of England told the BCC: “Like all businesses in our sector, our biggest challenge is going to be addressing the huge additional costs of the NI and NMW increases, which can only be addressed by improving productivity, reducing staff levels, and increasing prices.”Another company dubbed the Budget cost increases “insane”.
Budget hits confidence
Jane Gratton, deputy director of public policy at the BCC, said these concerning results “are likely to represent just the tip of the iceberg”.

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“Business confidence has been hit hard since the Budget. Employers are now having to plan for a significant increase in employment costs, with steep rises in National Insurance and the minimum wage coming down the track in April.
“This will inevitably impact on recruitment, retention and staff development. Firms tell us they will have to make some tough decisions to balance the books,” she said.
Training takes a dip
Some firms also told the BCC that they are reducing training investment, with 19% doing this compared with 13% in the previous quarter. Some 22% said they had increased training investment, down from 25% in the previous quarter. Meanwhile, 60% of businesses said training investment had remained the same.
Gratton said these reductions were also “worrying… because improving skills is a vital part of driving economic growth”. Many firms are still struggling to recruit the right types of workers, with 79% of firms facing difficulties, up from 76% last quarter.
“Our data shows firms are facing significant challenges recruiting the right people. The problems in the construction and manufacturing sectors are particularly concerning,” Gratton added.