Businesses squeezed by Rachel Reeves’ 2024 Budget are passing extra costs onto consumers
Businesses are pushing the cost of the upcoming increases in National Minimum Wage (NMW) and National Insurance Contributions (NIC) brought in by Rachel Reeves 2024 Budget onto consumers, with prices set to rise even higher in the coming months, say leading audit, tax and business advisory firm, Blick Rothenberg.
Robert Salter, a director at the firm, said: “The UK Consumer Price Index (CPI) rate went up to 3% for the year to January 2025 per the Office of National Statistics (ONS.) This is compared to a rate of 2.2% as of July 2024. The increase in CPI was almost inevitable after Rachel Reeves’s Budget in October 2024, as businesses need to mitigate the increases to the NMW and Employer NIC rates coming in from April 2025. They are doing this by passing on the cost to consumers.”
He added: “The CPI is a statistical estimate of the level of prices of goods and services bought for consumption by households. Lower income households who may already be struggling with the cost of living will feel the pinch from this increase acutely.”
Robert said: “It is easy to see that this pressure on prices will only increase over the coming months, as those firms which haven’t yet adjusted their prices for the forthcoming wage and NIC rises will need to do this in the next few weeks.”
He added: “The fact that the government gave significant pay rises to various public sector workers without any evidence of improved efficiency via changes to working practices in the Autumn is also helping to push up inflation. Private sector employers are competing for workers and if public sector workers wages go up, the private sector will need to match them to attract employees. This is yet another cost that businesses will likely have to pass on to consumers”
Robert said: “The increase in inflation, at a rate above what economists appear to have been expecting, arguably undermines the Bank of England’s ability to actually reduce interest rates. This is not the news Rachel Reeves was hoping for, but it is news she should have expected given that the NIC and NMW rises created the perfect conditions for increased inflation.”