As UK business leaders gather for the Confederation of British Industry (CBI) annual conference, a palpable sense of unease permeates the air. The focus of their concern? The potential negative impact of the tax rises introduced in Chancellor Rachel Reeves’ recent budget.
‘Heavy Burden’ on Businesses
CBI CEO Rain Newton-Smith pulled no punches in her assessment of the situation, stating that the tax increases have placed a “heavy burden” on businesses across the country. She highlighted the rise in National Insurance and the lowering of the threshold, along with the expansion and increase of the National Living Wage, as key factors contributing to this burden.
According to a survey conducted by the CBI in the wake of the budget announcement, nearly two-thirds of firms believe that the tax changes will have a damaging effect on UK investment. Even more alarming, half of the surveyed businesses are now considering reducing their headcount as a direct result of these measures.
When you hit profits, you hit competitiveness, you hit investment. You hit growth.
– Rain Newton-Smith, CBI CEO
Stagnation Looms
The timing of these revelations is particularly concerning, as data released just last Friday indicated that the UK private sector is already stagnating this month, following the announcement of the budget at the end of October. Many business leaders fear that the tax rises will only exacerbate this trend, leading to a prolonged period of economic stagnation.
Newton-Smith emphasized the far-reaching consequences of hitting business profits, warning that it would inevitably lead to reduced competitiveness, investment, and growth. This sentiment echoes the concerns of CEOs and CFOs across the nation, who are now faced with difficult decisions regarding their ability to invest, expand, and hire new talent.
Reeves Defends Budget
In response to the growing criticism, Chancellor Reeves is expected to mount a defiant defense of her budget at the CBI conference. Sources close to the Chancellor suggest that she will argue that businesses have offered “no alternatives” to her tax-raising measures, emphasizing that the government had little choice but to take these steps to address the challenging economic situation left behind by the previous Conservative administration.
I have heard lots of responses to the government’s first budget but I have heard no alternatives.
– Rachel Reeves, Chancellor of the Exchequer
CBI Seeks Greater Influence
The CBI, which faced its own challenges last year amid claims of sexual misconduct and a “toxic culture,” is now seeking to reestablish its influence over government policy. While Newton-Smith is expected to commend the government for “drawing the curtain on a near decade of instability,” she will also urge them to shift from “consultation to co-design” when it comes to working with businesses.
The success of this approach remains to be seen, as the conference unfolds against a backdrop of economic uncertainty and growing tension between the government and the business community. As CBI President Rupert Soames recently noted, the organization faced a “near-death experience” in the wake of the misconduct scandal, and this conference will serve as a critical test of its ongoing recovery efforts.
Looking Ahead
As the CBI conference continues, all eyes will be on the interactions between business leaders, Chancellor Reeves, and opposition leader Kemi Badenoch. The Bank of England’s conference, running concurrently, may provide additional insights into the central bank’s plans for interest rate adjustments in the coming months.
Meanwhile, the global economic landscape remains in flux, with the recent nomination of billionaire hedge fund manager Scott Bessent as the next US Treasury Secretary adding a new dimension to the ongoing discussions. As a Wall Street-friendly pick by President Donald Trump, Bessent’s appointment is likely to have far-reaching implications for international financial markets and trade relations.
Ultimately, the outcome of these debates and the policy decisions that follow will have a profound impact on the future of the UK economy. As business leaders and policymakers navigate these turbulent waters, the need for open dialogue, innovative solutions, and a shared commitment to sustainable growth has never been more apparent.
