The dual impact of National Insurance hikes and Donald Trump's tariffs led to caution among businesses in the second quarter of 2025, a new economic survey reveals.
Greater Birmingham Chambers of Commerce's Quarterly Business Report for Q2 is the first since the Government's new National Insurance measures kicked in which unsurprisingly had an impact on cashflow and labour costs.
However, businesses are reporting stability when it comes to the price of goods and services with more than half (58 per cent) anticipating constancy in their pricing, up by 13 per cent on the previous quarter.
Raj Kandola, acting deputy chief executive of Greater Birmingham Chambers of Commerce, said: "The results from our latest Q2 Quarterly Business Report underline the continued impact of domestic and international developments on the local business community.
"In particular, export activity has been quite clearly impacted by the USA's new tariff regime.
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"With the National Insurance measures kicking in at the start of April, it was perhaps also no surprise to see firms reporting additional challenges related to cashflow and investment in capital expenditure the lowest on record since the start of 2021 as the º£½ÇÊÓƵ grappled with the fallout from the pandemic."
The economic survey, produced in partnership with Birmingham City University, reveals stabilisation of business activity during the second quarter of the year - with no change in the volume of sales and export orders.
However, the proportion of businesses reporting higher sales dropped from 44 per cent in Q1 to 36 per cent in Q2. Those reporting an increase in orders fell from 40 per cent in Q1 to 31 per cent in Q2.
While businesses experienced little change in their headcount, labour costs emerged as the most frequent source of price pressures (34 per cent in Q2, up from 32 per cent last quarter) - due to the increase in employer National Insurance Contributions and the National Minimum Wage and Living Wages which took effect in April.
Similarly, the most prevalent external factor impacting business confidence was corporate taxation, as cited by 32 per cent of firms.
Concerns about corporate taxation have increased significantly since Q3 2024, prior to the Autumn Budget. This time last year just 15 per cent of local businesses expressed concerns about corporate taxation.
Inflation was the second most frequently reported concern, expressed by 22 per cent of respondents. This represents a slight uptick of one per cent since Q1, but a drop of four percentage points from Q2 of last year.
Mr Kandola added: "Cost pressures linked to the challenges posed by hiring staff are a stark reminder of the uncertainty caused by the introduction of the Employment Rights Bill and the unintended consequences that could come to light as the Bill passes through Parliament.
"Nevertheless, it was also reassuring to see that domestic sales activity along with turnover and profitability projections remain broadly in line with the previous quarter which in itself is a testament to the ongoing resilience displayed by businesses across the region."
