Businesses are still paying the price of inflation. They need to know Government is on their side

According to the Office for National Statistics, prices in December were 3.4 per cent higher than a year earlier, up slightly from November. That’s a long way down from the peaks of the past couple of years, but our research shows that inflation remains a key concern for businesses, cited as a growing worry by 56 per cent of respondents in our latest business survey.

To understand where inflation might go next, it’s worth looking beyond the headline numbers and listening to what businesses are saying about the months ahead. The British Chambers of Commerce’s Quarterly Economic Survey, which polls thousands of firms across the UK, offers a useful window into those pressures.

The latest survey shows that around half of businesses expect to raise their prices in the near future. That’s not because firms want to push prices up for the sake of it, but because many are still dealing with higher costs, from wages and taxes to energy and raw materials. Labour costs remain far and away the main cost pressure for firms, cited by 72 per cent of respondents.

At the end of 2025, businesses told us:

“Raw material prices are steadying but increased taxation and costs around employees are prohibiting future investment.”

-Medium sized manufacturing in Liverpool

“The impact of employer national insurance and doubling of business rates continues to hit hard. Food inflation continues to hit our cost base, as does an increase in electricity prices.”

-Micro sized logistics firm in Hampshire

Why does this matter? Because inflation isn’t just driven by global shocks. It’s also shaped by what happens here at home. When firms expect their costs to stay high, those pressures often feed through into the prices we all pay. That makes it harder for inflation to fall quickly, even if some of the worst supply problems are behind us.

There’s also a wider concern. The same survey shows business confidence is fragile. Fewer firms are expecting higher sales or increased investment over the coming year. That combination: rising costs but uncertain demand, puts companies in a difficult position, especially small and medium-sized businesses that have less room to absorb shocks.

So what does this mean for 2026?

The good news is that inflation is unlikely to return to the extreme levels seen in recent years. But the message from businesses is clear: price pressures haven’t disappeared. Without action to ease the cost burden on firms, inflation could stay higher for longer than many hope.

The economy needs businesses that can boost investment, transform productivity and trade around the world. The challenge for policymakers is restoring confidence across the economy, easing the cost burden on firms and getting inflation moving in the right direction again.

____________________

Stuart Morrison is Research Manager at the BCC Insights Unit.

LBC Opinion provides a platform for diverse opinions on current affairs and matters of public interest.

The views expressed are those of the authors and do not necessarily reflect the official LBC position.

To contact us email opinion@lbc.co.uk