More than six in 10 businesses in the UK are planning on hiking prices as companies struggle with inflation and higher energy bills.
Business confidence is as low as it was during the COVID pandemic, according to a survey from the British Chamber of Commerce (BCC), with two-thirds (65%) of businesses planning to raise prices due to cost pressures.
Around half (47%) of UK firms said they would struggle to pay their energy bill once the current business support package ends.
The survey of over 1,000 companies also found that that only one in three (34%) businesses believed their profits will increase over the coming year, and 36% expected a decline.
A quarter of firms reported a decrease in sales in the last quarter of 2022, with hospitality firms the least likely to report improvements.
Shevaun Haviland, director general of the BCC, said: “This snapshot of the state of play for business at the start of 2023 sets out exactly why the chancellor must act in his budget to fuel investment in the UK.
“We know we have a tough year ahead. With costs piling up on their doorsteps and so much uncertainty on government policies, there is currently little incentive for firms to risk either their dwindling cash reserves or fresh loans on new projects.
The BCC has identified four key “non-negotiable” areas for chancellor Jeremy Hunt to focus in order to boost the economy this year.
The trade body wants the spring budget to unlock talent and ease pressure in the labour market by making childcare more affordable for cash-strapped parents and guardians.
It is also calling for a boost for UK start-ups by further reforming the business rates system to remove the upfront financial squeeze they face.
Another key demand is for the chancellor to set a framework for Solvency II investment that helps direct funds to small and medium-sized businesses (SMEs) where they can have the most impact, leveraging the opportunities of green innovation.
Finally, the BCC is calling for funding to help businesses become greener and more energy efficient.
Haviland added: “Firms know that the UK’s finances are tight, but the chancellor needs to show more faith in the ability and talent of our businesses.
“If they can see the government is prepared to invest in them, by taking action on childcare, energy costs, green funding and Solvency II, then the future could soon look a lot rosier and greener.”
The call on the chancellor by businesses come as Citigroup (C) is forecasting inflation will plunge to a little over the Bank of England's (BoE) 2% target by the autumn, as falling gas prices ease Britain's energy crisis.
Citigroup has forecast that inflation will fall to 2.4% in the final three months of the year and dip to 1.9% in the first quarter of 2025.
The prediction is far more positive than the BoE's estimates that inflation will be around 4% by the end of the year.
Investment bank JP Morgan (JPM) also revised its forecasts and is no longer predicting a recession in the UK this year.