© Reuters. Image of the file: The workers make their way around the city of London on a cold and sunny day in London, Britain, January 9, 2025. Reuters / Chris J. Ratcliffe / Archive Image
Written by Andy Bruce
(Reuters) – A clear majority poll showed that a clear majority of British companies seem ready to reduce salary bonuses for employees in response to the upcoming tax increases, and that they are still pessimistic about the future of the economy.
Incomes Data Research, which provides data, said 69% of the employers whose views were most likely would reduce wage rewards to make up for the increase in salary taxes announced by Finance Minister Rachel Reeves in her first budget last October.
More than half of these participants said they were “very likely” to slow down their salaries.
The survey highlights the main uncertainty facing England before the interest rate was announced on February 6.
The Bank of England tries to measure whether employers’ reaction to increased taxes is to reduce jobs, wages or profits, or raise prices.
Most investors and economists believe that the central bank is likely to reduce interest rates by a quarter of a percentage of next week, but the image for the rest of the year is less clear.
A separate survey published by the British Industry Federation on Monday showed that companies were less pessimistic about the next three months than they were in December.
The CBI growth index – which measures expectations between companies through manufacturing and services, including retail – barely increased in January to -22 of its lowest level in more than two years at -24 in December.
“After the deadly period preceding Christmas, the new year did not bring any feeling of renewal, as companies still expect a significant decrease in the activity,” said Albish Paliga, the chief temporary economist at the Indian Central Bank.
“In addition to plans to reduce the number of employees and raise prices more, this risk increasingly difficult to barter for policy makers.”
Reeves said its tax increases are once to put public finance on a stable basis while collecting money for services and investment. It is expected to receive this week about its plans to accelerate the slow British economy.
A third of the employers in the IDR poll said they are likely to lay off workers, while 45% said they will accommodate the impact of tax increases through low profits or other means.
IDR said that 37% of employers intend to grant wage increases ranging from 2.0% and 2.99% this year, while 43% of wage increases expected between 3.0% and 3.99%. Only 14% expected the interest rate to reach 4% or more, which provides some satisfaction with England, which is concerned about the continued pressure of inflation in the economy.
IDR has explored 168 employers covering 1.2 million workers in November and December. The CBI 990 report covered from December 19 to January 14.
