Amid headlines of Chancellor Rachel Reeves being moved to tears in yesterday's parliamentary exchanges on welfare reform, her gamble of employer's national insurance contribition changes may be cause for further lament, according to today's forecast for Q2 from the British Chambers of Commerce.

By way of recap, April 1's key four changes were:

● A cut of the secondary Class 1 National Insurance (employer) threshold from £9,100 to £5,000 a year, meaning liability kicks in at the lower rate.

● A 1.2% increase to the chief rate of secondary Class 1 National Insurance (employer) contributions, from 13.8% to 15%.

● A rise for the maximum Employment Allowance claim amount per year, from £5,000 to £10,500.

● The removal of the £100,000 restriction where employers with an employer NIC liability above this level in the previous tax year were unable to claim the Employment Allowance.

Given the Chancellor's declared mission to raise the revenues required to fund public services and restore economic stability, the NIC changes have now been in action for Q1 in the accounts of firms who who aren't a solo operation, so the BCC perspective is timely.

As per an established narrative here at Punchline-Gloucester.com, the impact of the change cuts through to one crucial aspect of business: confidence. The word may seem like an abstract entity, but it's what ensures the vigour and determination of firms across both Gloucestershire and nationally, and it's what determines survival and success, no matter what the balance sheet says.

In that context, the BCC report puts it bluntly: "Business confidence remains weak following the employer NI rise, with just under half of firms (49%) expecting turnover to increase in the next 12 months."

Presenting the Quarterly Economic Survey for Q2, David Bharier, BCC Head of Research said: "Business sentiment in Q2 remains fundamentally subdued, following last autumn's tax increase announcements and the more recent introduction of global tariffs.

"April's rise in NIC has cemented tax as the dominant concern for firms. Businesses are entering a new employment landscape marked by structurally higher labour costs and administrative requirements, fuelling increased anxiety about redundancies."

He added: "While there has been some easing in our price expectations indicator, this follows a spike to near historic highs in Q1 and may indicate that firms already baked in the recent NICs increase. Inflation is likely to remain volatile in the short term, as any escalation in global conflict could trigger renewed shocks to commodity and shipping prices. SMEs are now operating in an increasingly unpredictable world, he said, and have limited capacity to absorb further disruption."

In terms of what firms now need, he added: "A meaningful improvement in business conditions will depend on a roadmap to ease the tax and admin burden, de-escalation of geopolitical tensions, implementing improvements to the UK-EU trading deal, and further mitigation of US tariffs."

In outline, the report points out that:

● Tax remains the main concern for firms, with 56% citing it as a worry closely followed by inflation (52%)

● No significant change in sales indicators, with only 32% of business reporting a rise in sales

● A quarter (24%) of firms have cut back on investment in the past three months, while only 21% have increased investment.

As a sliver of comfort for 11 Downing Street, it also found that the proportion of businesses expecting to put up prices over the next three months has eased to 44% from a spike of 55% in Q1.

Elsewhere, the report suggests that while price rise expectations have eased back from near historic highs in Q, tax remains the biggest concern cited by firms. Only a third told the BCC that their domestic sales had grown over the last three months.

Mark Owen, Editor of Punchline-Gloucester.com, said: "Rachel Reeves' key blunder in April was that she hadn't priced in how businesses had failed to recover from the pandemic. Their savings were raided, they'd borrowed, and now they face this. They're not recruitment agencies; firms need to make profit and the changes, plus minimum wage increases, are simply not sustainable. No matter how hard firms of all sizes we depend on here in Gloucestershire actually graft, they are being shoved towards a tipping point. Sure, there will always be those who do well in tough times, but employers are now asking themselves what the Chancellor will come for next: their pension pots, higher tax, more NIC hikes? Put simply, there's no more meat on the bone. We've touched base with countless firms this month across the county for the delivery of Punchline magazine – and I've never seen so many companies struggling."