Rachel Reeves’ tax raid unveiled in October’s Budget has triggered a collapse in businesses’ confidence in Britain, a new survey has shown.
It came as recruitment firms warned businesses were taking on fewer workers as they digested higher bills caused by the Chancellor’s spending plans.
A report from consultancy firm BDO showed that business optimism across the UK had plummeted to its lowest level in two years as owners were forced to confront the prospect of rising costs and ongoing challenges in the jobs market.
Businesses suffered a double whammy in October when Reeves unveiled plans to hike National Insurance contributions for employers and introduce an inflation-busting increase in the minimum wage.
Bosses have warned the measures will lead to job losses, shop closures and price hikes as they struggle to pay the additional costs.
Following the Budget, BDO reported that its optimism index for businesses had dropped to 93.49 in November, its lowest since January 2023 when firms were grappling with surging inflation and political turmoil sparked by the aftermath of Liz Truss’s mini-Budget.
BDO said the fall was ‘likely to reflect businesses’ immediate reaction to announcements in the Autumn Budget,’ noting that confidence had dropped particularly sharply in the services industry, which includes retailers and other consumer-based firms.
Retail bosses have been among the fiercest critics of the Chancellor’s planned tax hikes, with the heads of M&S, Sainsbury’s, Amazon UK and Next among those warning the measures will lead to higher prices and job losses.
Rachel Reeves visiting Leeds Corn Exchange last Friday. The Chancellor’s Budget has triggered a collapse in businesses’ confidence in the UK, a survey has shown
A report from consultancy firm BDO showed that business optimism across the UK had plummeted to its lowest level in two years (file photo)
Adil Mehboob-Khan, the boss of high-end London department store Liberty, joined the chorus on Sunday when he said the government’s hammering of high street stores was making British businesses ‘less competitive.’
He also hit out at the Chancellor’s previous statements not to raise taxes on working people but then introduce measures that would hit their spending power anyway.
‘It’s a bit of a stretch to make a statement that you won’t increase taxes, then you increase a tax that people may not perceive as a tax because it doesn’t hit their compensation directly,’ Mehboob-Khan told the Telegraph.
BDO also highlighted that according to its trackers, the UK’s economic output had shrunk last month for the first time this year.
It blamed the reversal on ‘reduced customer confidence, declining staff numbers and rising input costs’ as pessimism about the economy persisted into the winter months.
The bleak figures came as recruitment agencies reported that businesses were looking to take on less staff as they digested the impact of Labour’s tax raid on their spending plans.
The Recruitment and Employment Confederation (REC) said firms were reassessing staffing needs and putting a pause on recruitment activity and that as a result placements of staff into jobs last month fell at its fastest rate for more than a year.
‘It should be a surprise to no one that firms took the time to reassess their hiring needs in November after a tough Budget for employers,’ said REC head Neil Carberry.
He added: ‘The real question now is whether businesses will return to the market as they go into next year with greater certainty about the path ahead.’
The bleak numbers came as businesses are looking at taking on less staff in light of Labour’s tax raids (file photo)
The Government has been facing a barrage of criticism from multiple parts of the UK about the Chancellor’s Budget plans.
Last week, Treasury Minister James Murray was at the receiving end of a bitter backlash to the Budget in Darlington, County Durham, when the owners of a patisserie said small businesspeople were ‘crying around their kitchen tables’ trying to cope with extra taxes and increases to the minimum wage.
In November, Bank of England governor Andrew Bailey said businesses were right to warn of potential job cuts as a result of the Budget.
And last week he said the planned hike in National Insurance risked keeping interest rates higher for longer, leaving mortgage holders and other borrowers facing more pain in the form of higher repayments.
