Since being sacked by the UK Labor government the budget last month, the tone within businesses has been one of panic and concern over a £40bn tax hike, largely funded by increases in employers’ national insurance contributions.
Higher business burdens will leave firms scrambling to control costs while keeping profits intact and put them in “damage control” mode, according to the chief executive of the Confederation of British Industry (CBI).
“Tax increases like this should never again be passed on to business simply,” the CBI’s Rain Newton-Smith told the group’s annual conference. on monday. “Too many companies have to compromise their growth plans.”
In a post-Budget survey, the CBI found that half of the 266 companies that responded are considering downsizing, with nearly two-thirds saying they may halt hiring plans.
Companies were considering closing shop and moving to other countries with more tax-friendly policies in anticipation As for the budget, it seems to have deepened since Chancellor of the Exchequer Rachel Reeves announced detailed measures.
High-profile CEOs have commented on how new fundraising policies are damaging the attractiveness of UK investment. For example, Salman Amin, the head of McVitie’s biscuit maker Pladis, praised Britain for being the group’s “biggest investment” worldwide.
However, given the new policies that will affect all aspects of the business, he lamented how “it’s getting harder and harder to understand the investment case”. CBI conference.
Other retailers have also expressed similar concerns about rising costs, particularly the increase in the minimum wage, which was also announced as part of the Budget. Sainsbury’s boss Simon Roberts he warned The higher cost to employers is expected to increase inflation once it returns to normal.
Since the Autumn Budget was announced in October, tensions between business and the current government have increased. Although Reeves has championed the necessary measures to improve public services and repair the damage done by his predecessors to the state of public finances, they will leave businesses with squeezed margins and gasping for air.
This could hurt the growth prospects of the UK economy, which has dried up as it struggles to expand and compete with rivals such as the US.
Academics say the government needs to find ways to raise money, which could come from taxes excess profits rather than a single tax that applies to all employers, large and small.
“When you make a profit, you beat the competition, you make an investment. You’ve hit growth,” Newton-Smith said.
The CBI chief praised the government’s efforts to increase capital spending and said the lobby group would launch a “Competitiveness Plan” highlighting areas for work to improve the UK’s business climate.
