(Bloomberg) — UK business confidence rose this month to its highest in almost a decade with an increased majority of firms planning to hire more staff in the coming year despite Chancellor of the Exchequer Rachel Reeves’ tax hikes, a survey found.
More than 80% said sharp increases to payroll taxes and the minimum wage that took effect in April would have only a limited impact on their staffing plans, the Lloyds Business Barometer showed. Hiring intentions rose for a fourth month, with 62% of businesses planning to add workers over the next 12 months.
Business optimism rose 2 percentage points to 54, the highest since November 2015, according to the poll of 1,200 firms carried out in the first two weeks of August. A gauge of trading prospects also improved to reach decade highs.
The more positive outlook was accompanied by an increase in the proportion of firms intending to raise prices and deliver inflation-busting pay rises. Almost one in four now expect to increase wages by 4%, suggesting companies are passing on higher employment costs to their customers rather than their workers.
The numbers deliver a boost for Reeves, whose revenue-raising efforts have been criticized for stifling growth and driving inflation, particularly in food prices. In April, companies were hit by a £26-billion ($35 billion) increase in payroll taxes and a near 7% hike in the minimum wage, and further tax hikes are expected at the autumn budget as the chancellor battles to put the public finances back on track.
However, the findings are likely to fuel worries of persistent price pressures among Bank of England policymakers as they debate the pace of future interest-rate cuts.
Listen to the Bloomberg UK Politics podcast on Apple, Spotify or anywhere you listen.
Businesses plan to respond to any future increase in employment costs with more price increases, survey data from the Office for National Statistics showed on Friday. Some 28% of firms said they would pass on cost to consumers through higher prices, more than any other response. Almost a quarter planned to absorb the hit through profit margins and only 10% said they would reduce headcount.
“This continued upward trend in business confidence suggests UK firms remain optimistic about their own trading prospects while there is a modest cooling of confidence in the wider UK economy,” said Hann-Ju Ho, senior economist at Lloyds Bank Commercial Banking. “Wage expectations have seen a notable shift this month, but it remains to be seen whether this signals the start of a sustained trend or a temporary uplift.”
Lloyds said business confidence edged higher despite a drop in economic optimism. Some 35% of employers are set to increase pay by 4% or more, up 10 points from a month ago. The share of firms planning to put up prices in the coming year rose to 67% in August, while only 2% are expecting price declines.
–With assistance from Tom Rees.
(Adds ONS survey on response to future employment cost increases)
More stories like this are available on bloomberg.com
#Companies #Defy #Tax #Hikes #Plans #Hire #Survey #Finds
