UK economy on the brink as Rachel Reeves tax raid sparks major hiring freeze

Nearly two-thirds of businesses have revealed plans to slash hiring following controversial Autumn Budget tax hikes.

Industry leaders are calling the move a “damage control” measure, warning that it will trigger widespread layoffs, delayed pay rises, and stalled growth.

The Confederation of British Industry (CBI) has warned that the Chancellor’s increases are putting a severe strain on businesses, with 62% of those surveyed indicating they will scale back recruitment plans.

Nearly half of businesses also anticipate having to lay off staff, while 46% expect to delay pay rises for their workforce.

The poll, conducted by the CBI with 266 business leaders, highlights the potentially wide-reaching consequences of the tax hikes, particularly on companies’ ability to invest and expand.

Rain Newton-Smith, CBI Chief Executive, emphasised that profit is “not a dirty word” as it underpins firms’ ability to invest, but the Government’s actions have hindered that capability.

At the CBI conference in London today, Ms Newton-Smith welcomed the new political and economic stability offered by the Government following the turbulence of the Conservative years.

However, she condemned the way businesses were blindsided by the increase in National Insurance Contributions (NICs) and the lowering of the threshold at which they are paid.

She warned that these measures will make it more difficult to achieve the economic growth that both Ms Reeves and Prime Minister Sir are aiming for.

She said: “What really defines growth is the decisions made in boardrooms up and down the country. It’s CFOs (chief financial officers) asking, ‘Can we afford to invest? Can we afford to expand? Can we afford to take a chance on new people?’ Well, after the Budget, the answer we’re hearing from so many firms is still, ‘not yet.'”

Ms Newton-Smith also pointed out that the rise in NICs, along with the increase in the National Living Wage, which businesses have said will force them to pass on some costs to consumers, hire fewer people, or make less profit, has caught many businesses off guard.

She added that the potential cost of the Employment Rights Bill only adds to the burden businesses are facing.

In the Budget, the Chancellor announced a £70billion increase in public spending, funded through tax rises and increased borrowing. Labour also raised the minimum wage, which has been praised by workers’ groups and unions but criticized by businesses for the strain it will place on their operations.

In a message to the Government, Ms Newton-Smith emphasised the need for ministers to work more closely with businesses in the future after the shock of the Budget.

She said: “Tax rises like this must never again be simply done to business. That’s the road to unintended consequences.”

The Chancellor is expected to tell the CBI later on Monday that there is “no alternative” to tax rises as she defends the £25billion increase in firms’ National Insurance contributions.

The Guardian reported that Ms Reeves is expected to add: “I have heard lots of responses to the Government’s first Budget, but I have heard no alternatives.”

A Government spokesperson responded: “Last month we delivered a once-in-Parliament Budget to wipe the slate clean and deliver change by investing to repair the NHS and rebuild Britain, while ensuring working people don’t face higher taxes in their payslips.

“That meant difficult choices to repair the public finances and to put them on a firmer footing. However, the alternatives were more austerity, more decline, and more instability that would have left businesses and working people worse off.”