Budget tax hikes to 'hit growth' in blow to UK economy, business leaders warn

Budget tax hikes to ‘hit growth’ in blow to UK economy, business leaders warn

Posted by Admin November 25, 2024 Bussiness

The head of the Confederation of British Industry (CBI) has warned that tax rises announced in the Autumn Budget are undermining investment and growth in the economy among UK companies.

Rain Newton-Smith will tell the CBI’s annual conference in London later today that businesses are facing squeezed margins and reduced profits in an increasingly challenging trading environment.

She will argue that hitting company profits directly impacts the UK’s economic competitiveness and investment potential.

The warning comes as businesses grapple with recent tax increases, including higher employer National Insurance contributions, announced as part of Chancellor Rachel Reeves’ October Budget.

A recent CBI survey found that almost two-thirds of companies believe the Budget measures will have a negative effect on UK investment.

“Profits aren’t just extra money for companies to stuff in a pillowcase. Profits are investment,” Ms Newton-Smith will tell delegates.

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Reeves

“When you hit profits, you hit competitiveness, you hit investment, you hit growth,” she will warn in her address.

“Tax rises like this must never again be simply done to business,” she will say. “That’s the road to unintended consequences.”

She will call for a new approach to business-government relations, stating: “From now on we need an elevated partnership for a higher purpose.”

“Too many businesses are having to compromise on their plans for growth. We can’t let that stand and not act,” Newton-Smith will add.

The October Budget included a nearly £70billion increase in public spending, partly funded through higher business taxes.

Among the key changes was an increase in employer national insurance contributions, which has drawn criticism from the business community.

The Budget also raised the minimum wage, a move welcomed by workers’ groups but causing concern among businesses. Companies warn they may need to pass costs to consumers, reduce hiring or accept lower profits.

Recent indicators suggest immediate impacts, with a monthly business survey showing private sector activity contracted in early November amid falling confidence.

Major retailers including Tesco, Sainsbury’s and Marks & Spencer have warned of a £7billion cost increase due to Budget changes.

Newton-Smith will urge the government to accelerate reforms to business rates and provide more flexibility on apprenticeship levy spending.

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Newton-Smith will voice her concerns in a speech later today

CBI

The CBI chief will also push for reduced regulatory barriers across industries, following the Chancellor’s earlier promises for the financial sector.

“On regulation, the Chancellor’s Mansion House speech committed to putting risk appetite back in our toolbox for growth. Now we need the same approach for regulation across sectors,” she will say.

A Government spokesperson defended the Budget, stating: “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.”

The spokesperson added that despite difficult choices, the alternatives would have left businesses and working people worse off.