Businesses face perfect storm as tax rise kicks in

"This is worse than Covid or the 2008 crash. There isn't a day that goes by when you aren't hit with another rising cost."

Adrian Hanrahan is the managing director of Robinson Brothers - a chemicals manufacturer in the West Midlands - and he says that his confidence and that of his customers is beginning to evaporate.

"I'm usually an optimistic person but that has been zapped. I just got off a call with a customer who wants to hold less stock so that means we are holding back on production and investment ourselves."

He says the £6bn rise in employers' National Insurance that comes in on Wednesday will add £90,000 to his own 250-person payroll - equivalent to the wages of three graduate chemists - and it couldn't come at a worse time.

"It's another kick in the teeth at a time when everything is going up. We use nickel as a catalyser - that's tripled. Plastics, transport, you name it. The sheer volume of price increases is incredible and we can't pass it all on as my customers - and my customers' customers - can't afford it."

And yet Adrian said it could have been much worse for his company.

"If we hadn't hedged some of our energy costs we would be looking at £1.75m extra a year in bills and that would have probably finished the company."

Businesses that haven't bought gas in advance or whose deals are ending are seeing energy cost rises averaging 250% as they are not protected by a price cap.

Many have already gone under.

The number of company insolvencies in February was 23% higher than the same month last year with county court judgements against firms (an early sign of financial distress) doubling. There is growing concern that thousands more firms who made it through the pandemic will not survive the cost onslaught at the same time as the withdrawal of many Covid support measures.

Julie Palmer, partner at insolvency experts Begbies Traynor, said: "Businesses that have bravely battled through the pandemic could now start to fail as the pressures they face become too much.

"Support from the government such as furlough payments, tax reliefs and a moratorium on landlords being able to evict businesses due to rent arrears are due to expire. It's a perfect storm and there are signs the dam is beginning to break."

So far the government has focused its efforts to cushion the energy blow on consumers. The eyes of company owners now turn hopefully to the government's long awaited energy strategy due to be published on Thursday.

It's expected to include new and accelerated investments in nuclear, renewables and UK oil and gas production but that will not provide immediate relief to businesses facing crippling bills.

Insiders at the Department for Business pointed towards recent comments from the prime minister in the House of Commons that specific help may be forthcoming for intensive energy users such as steel, ceramics and glass makers.

For them and thousands of other manufacturers, chip shops, restaurants, care homes, and pubs who won't qualify for that help - this is a "cost of doing business" crisis to rival anything in living memory.

The Treasury said nearly half a million UK businesses will benefit from a £1,000 tax cut when it raises the Employment Allowance on Wednesday.

It means smaller firms will be able to claim up to £5,000 off their employer National Insurance Contributions (NICs) bills, up from £4,000.

Chancellor Rishi Sunak said: "This tax cut for half a million businesses will help them thrive and grow to help drive our economic recovery.

"It comes on top of a suite of wider tax cuts available to firms, including 50% business rates relief, a record fuel duty cut and the super-deduction, the largest two-year business tax cut in our history."