Impending tax rises temper business confidence in Q4 – Chamber report

The impact of tax rises weighed heavily on Greater Birmingham businesses during the final quarter of 2024, according to a major economic report released today.

Greater Birmingham Chambers of Commerce’s Quarterly Business Report for Q4 reveals concerns among firms following business tax increases announced in the Chancellor’s Autumn Budget.

This led to a fall in recruitment activity and the significant increase in the number of companies expressing concerns over price pressures.

However, there were signs of resilience from the region’s businesses – with both domestic and export activity picking up towards the end of the year.

The report, produced in partnership with Birmingham City University (BCU), revealed 47 per cent of firms increased their UK sales (up 7 per cent from Q3), although nearly one in five (19 per cent) reported a decrease.

Export activity, which lagged behind domestic sales throughout 2024, showed signs of improvement in Q4, with 33 per cent of companies reporting an increase in sales, custom and bookings - the highest level since Q2 2023.

Meanwhile, data suggests employer cost implications arising from the 2024 Autumn Budget, such as national insurance contributions and minimum wage increases, may have contributed to a tempering of hiring activity.

Just 26 per cent of firms expanded their workforce in Q4 - down 4 per cent from Q3 and 10 per cent since the start of 2024.

Less than a third of businesses (30 per cent) expected workforce growth in the coming quarter, while just 44 per cent of firms said they operating at full capacity – the lowest level since Q1 2021.

Business confidence weakened considerably over the last quarter, with just 47 per cent of firms anticipating improved profitability – a decline of 10  per cent over the past three months.

Concerns over profitability were linked to rising costs forecasted for 2025, with half of businesses surveyed anticipating price increases in the next quarter.

Henrietta Brealey (pictured), CEO of the GBCC, said: “In light of the business tax rises announced in the recent Autumn Budget and the introduction of the Make Work Pay programme, it was perhaps no surprise to see a record number of firms expressing concerns around the impact of corporate taxation.

“A fall in recruitment activity and that price pressures were the highest on record since the end of 2022 following Russia’s invasion of Ukraine.

“Profitability and turnover projections were also impacted as businesses continue to operate in an uncertain climate.

“Nevertheless, the data also revealed that both domestic and export activity picked up towards the end of year and recruitment levels remained broadly similar – a testament to the resolve that many businesses continue to display across the region.”

Professor Harris Beider, BCU’s pro-vice-chancellor for Engagement, Enterprise and Innovation, said: “The Q4 survey highlighted a mixed outlook. Whilst domestic sales saw an increase, labour force growth was more tempered when compared with the preceding quarter, perhaps reflecting employer cost implications from the Autumn Budget, whilst overall confidence fell sharply aligned to profitability concerns, persistent inflationary pressures, and record-high taxation worries.

“Reflecting the theme of this report, tapping into the innovative and entrepreneurial capacity of the region and underpinning innovation-led businesses with high growth potential will support the drive to increased levels of economic resilience.”

The Q4 Quarterly Business Report launches this Thursday (6 February) at BCU’s Curzon Building, with an event focused on supporting entrepreneurship in Greater Birmingham.

Guest speakers include Jude Jennison, founder of Leaders By Nature, and David Mellor, head of Growth and Incubation at STEAMhouse.