Cutting business costs is the missing link in PM’s cost-of-living mission

• CBI urges government’s new Cost-of-Living Taskforce to make cutting business costs central to its work – warning that squeezed margins mean less investment, hiring and wage growth.
• Businesses paid almost £345 billion in taxes in 2025/26 – 31.3% of all UK tax receipts and 12.7% more than the previous year.
• Employer National Insurance Contributions hit £123.1 billion in 2025/26, up 28% year-on-year – overtaking Corporation Tax as the largest source of business tax revenue.
• UK non-domestic electricity prices were around 45% above the G7 median in 2023 and 2024 – forcing firms to delay or abandon investment.
• Firms spend around eight staff days a month on regulation at an estimated administrative cost of £22.4 billion a year.
• HMRC estimates businesses spend £15.4 billion a year complying with around 2,500 tax obligations.
• Report calls for introduction of strengthened cumulative impact assessments to identify and prevent
  measures that would increase consumer prices.

With the government’s new Cost-of-Living Taskforce beginning work and the Chancellor preparing for his first major economic speech – as well as an important Budget – a new CBI report warns that mounting business costs are squeezing firms’ ability to invest, hire and grow – undermining the government’s ambitions to raise living standards, regenerate communities and deliver growth in every postcode. Government must look to partner with business on a shared plan for growth, helping the economy address cost of living pressures.

New CBI analysis shows that, in today’s competitive market, companies are actively absorbing inflationary pressures and prioritising cost efficiencies to shield customers and make products as accessible as possible. Squeezed margins, lower investment and slower hiring make this more than just a balance-sheet issue – it directly affects the jobs, wages and investment felt by households and communities. The CBI says that without action to cut the cost of doing business, private sector investment will continue to be weak, preventing the productivity growth needed to support sustainable wage rises and deliver lasting relief from cost-of-living pressures.

The report draws on cross-sector business surveys and evidence from CBI member trade associations representing foundational sectors like retail, hospitality, food and drink manufacturing, construction, logistics, energy, steel, chemicals, aviation, shipping and mineral products.

The report identifies four critical pressures that are holding firms back and weakening local economies:

(1) Labour and energy costs remain the biggest drivers of financial pressure.

Firms say rising labour costs are damaging global competitiveness, with 94% of businesses reporting significant increases in energy costs since 2019. Together, these pressures are delaying investment, slowing recruitment, limiting wage growth and weakening the UK’s ability to compete internationally and reindustrialise its economy.

(2) Fragmented rules are driving up compliance costs.

Businesses point to fragmented planning systems, overlapping regulatory processes and administrative friction as further drags on their time and bottom lines. Delays, duplication and uncertainty are acting as a handbrake on investment and competitiveness and frustrating the faster, place-based delivery the government wants to achieve.

(3) Unnecessary UK–EU regulatory friction is making it harder to trade.

Businesses continue to face additional cost and complexity from navigating different UK and EU regulatory requirements. Government should pursue alignment where it delivers clear economic benefits – including implementing the UK–EU SPS agreement and expanding mutual recognition of professional qualifications and conformity assessments where practical – while retaining flexibility where UK approaches support
competitive advantage.

(4) Tax complexity is holding back growth.

Nearly one-third of firms say business rates have played a major role in delaying, reducing or cancelling property investment – holding back the renewal of high streets, town centres and industrial sites – while sector-specific taxes create further uncertainty and administrative burdens. Annually, businesses spend around £4 billion on internal costs to navigate tax obligations – reinforcing the case for simpler tax design and administration.

Rain Newton-Smith, CBI Chief Executive, said:

“The Prime Minister is right to put the cost of living at the heart of his government. But business costs are kitchen-table costs too. When firms are forced to absorb higher taxes, energy bills and regulatory costs, the consequences are weaker investment, fewer jobs and less scope to raise wages.

“Business is the economic engine that powers better public services, creates jobs and raises
living standards – the very things we need to revitalise our communities and help them prosper. But firms cannot play that role if they’re held back by mounting costs and fading confidence.

“The new Cost-of-Living Taskforce should make cutting the cost of doing business a central part of its work, and the Chancellor’s first Budget must mark a turning point for simplifying the rules firms face and giving companies the breathing room they need to thrive.

“The Prime Minister demonstrated in Greater Manchester what can be achieved when government, business and local leaders work to a shared plan. Putting the private sector to work in service of the public good has to start now if the government is serious about delivering growth in every postcode.”

Recommendations:

The report includes a number of recommendations for tackling the most significant cost pressures on firms around employment costs, energy bills, and business rates. These are best addressed through the upcoming Autumn Budget – the CBI's Budget submission will set out more detail in due course.

The report also highlights a number of immediate, fiscally neutral reforms with the potential to ease pressure
on household costs that can be addressed through the Cost-of-Living Taskforce, including testing new regulation for its cumulative impact on consumer prices, ending duplication across packaging regimes and improving efficiency across energy networks.

Introduce strengthened cumulative impact assessments for major new regulation, using the Food Inflation
Gateway to identify and prevent measures that would increase consumer prices.

Integrate EPR, the Plastic Packaging Tax and the PRN system into a single reporting framework, reducing duplicated costs that ultimately feed into grocery prices.

Accelerate electricity-market reforms that reduce balancing costs and improve network efficiency, lowering the long-term cost of energy for businesses and households.

Louise Hellem, CBI Chief Economist, said:

“From hospitality to manufacturing, we’re seeing the damaging impact that higher costs are having on operations and investment. With profitability levels lower than at any time since the 2008 financial crisis, we need to challenge unhelpful ‘profiteering’ narratives and implement a marked shift in policy that allows firms to move from simply absorbing higher costs to restoring their ability to invest, hire and grow.

“That must be mirrored by greater speed, effectiveness and accountability in decision-making from planners, regulators and public bodies – at both a local and national level – as well as a greater appreciation of the cumulative cost and regulatory burdens that firms face. It’s only by creating a stable and competitive business environment that we can meaningfully compete for global investment, talent and trade, and give businesses the injection of confidence they need to invest."