Business costs rise more than 70% as investment hits post-pandemic low

Business costs rise more than 70% as investment hits post-pandemic low

No single tax, employment reform or regulation is closing Britain's businesses. The problem is what happens when you stack one on top of another, then another, then another. New British Chambers of Commerce research suggests domestic policy-driven costs for a typical SME have risen by more than 70% since 2016, while investment intentions have fallen to their lowest level since the pandemic. Government assesses policies individually, but Britain's businesses have to pay for them collectively.

POLICIES DON’T STACK UP

No single regulation is causing business closures, but the accumulation of costs related to policies layered upon polices, is piling on the pressure. The UK economy is trying to grow with the handbrake on.

David Bharier of the British Chambers of Commerce (BCC) which has brought out its latest research says: no one policy is to blame for the pressure on British businesses; it’s the cumulative cost stack that’s holding investment back and keeping sentiment stuck in the slow lane.

Government tests each measure individually, but no one checks what happens when you pile them all on the same small firm.

The Data

The BCC’s Quarterly Economic Survey of more than 4,500 firms shows that only 17% increased investment in Q2 2026. That’s the lowest since the pandemic. Just 44% expect turnover to improve over the next year, down from 49%. In hospitality, that drops to 31%.

Labour costs are now the main pressure driving up prices. Taxation has been the leading concern since late 2024. The deeper problem though, is how policy is made and how complexity is dumped on small businesses without anyone calculating the cost of the total impact.

Up 71.5% a Year

The BCC’s Cost Stack Calculator models a typical firm with 50 employees and £5m turnover.

Between 2016/17 and 2026/27 the annual cost stack rises from £1.16m to £1.98m. That’s a 71.5% increase.  If you dig into the detail and the pain lands hardest on labour‑intensive firms where wages account for £590,755 of the rise. The statutory minimum has gone from £7.20 to £12.71 an hour with employer National Insurance up 141%. Add on auto‑enrolment pension contributions which are up 442%. All that is before Brexit trade costs, global input‑price shocks and profit taxes. For small and micro businesses, this is money that can’t be spent on creating new jobs and growing.

The Whole Picture

Small businesses don’t feel anyone is checking the combined impact. As the Employment Rights Act moved through parliament, 79% of firms said the costs of new policies weren’t being properly assessed. After the 2024 employer NI increase, 82% anticipated a negative impact, and 1 in 10 reported redundancies directly because of it.

Past governments tried to track the cumulative burden. The Business Impact Target (2015) required a running total of regulatory costs, verified by the Regulatory Policy Committee (RPC). Ministers promised no increase in the regulatory burden. Instead, that burden rose by an estimated £17.2bn before the target was scrapped in 2023.

Today, the RPC still checks individual impact assessments above a threshold, but no one in government verifies the aggregate effect.

Small firms feel the real pressure of yet another rule, adding another cost, with another form and no sense that anyone is looking at the whole picture.

Take the Brakes Off

When the Chancellor delivers his first Budget, the aim must be to make it possible for firms to invest, innovate and export more.

The true cost of the policy pile is the part we never know the extent of; the investment that never happened, the hire that wasn’t made, the expansion that was shelved.

Firms of every size should be able to look at the Budget and say: “This makes it easier to invest and grow.” The last thing they need is to discover afterwards that another policy layer has been added to the stack with more attendant costs.

Until government starts measuring the whole burden, not just each piece individually, small and micro businesses will keep feeling the impact the BCC is concerned about. It’s not one regulation that’s breaking us. It’s all of them, together, and that’s the brake the next Budget needs to release.