Nearly two-thirds of UK businesses are set to scale back hiring plans in response to the Chancellor’s £40bn tax rise, according to a new poll by the Confederation of British Industry (CBI).
The survey of 266 business leaders found that 62% of them intend to reduce hiring, nearly half expect to lay off workers, and 46% plan to delay employee pay increases.
The findings underscore growing frustration among businesses, particularly in retail and hospitality, over changes such as the increase in employers’ National Insurance contributions and the lower earnings threshold for contributions. These measures come in conjunction with an increase in the national minimum wage and comprehensive reforms in the field of labor rights, which increases financial pressures.
Ren Newton-Smith, CEO of the Central Bank of Iraq, is expected to criticize the government at the annual conference of the Central Bank of Iraq. In her direct address to Chancellor Rachel Reeves, she will argue that tax rises are undermining the UK’s competitiveness and growth potential.
“When you hit profits, you hit competitiveness, you hit investment, you hit growth,” Newton Smith would say. It will emphasize that profits are critical to reinvesting in communities, training the workforce, and economic expansion.
Impact on companies and employment
CBI survey reveals stark budget response:
Hiring freeze: 62% of companies plan to hire fewer employees.
Layoffs: 47% expect to reduce their workforce.
Delayed salary increases: 46% expect no salary increase.
Businesses in sectors such as retail and hospitality, which rely heavily on low-paid and part-time staff, are particularly affected by the lower National Insurance threshold and higher minimum wages.
The British Retail Consortium estimates the budget measures will add £7bn to businesses’ costs, with major retailers such as Tesco, Marks & Spencer and Boots already warning of inevitable job cuts.
Newton-Smith will also address changes to inheritance tax affecting farmers, highlighting concerns that many may no longer be able to pass on their businesses to the next generation. Business leaders are expected to warn the government that rising costs could hamper investment in less economically developed areas, undermining efforts to tackle the UK’s unemployment crisis.
The Chancellor and ministers are set to face increasing pressure from street leaders, with a meeting scheduled this week between retail bosses and Gareth Thomas, the Minister for Services, Small Business and Exports. Business leaders plan to raise concerns about job losses and hiring freezes, arguing that rising costs could stifle growth and investment across the country.
As the government prepares to issue an official report on addressing the unemployment problem and boosting employment rates, it faces a difficult balancing act. Newton-Smith’s speech is expected to call for greater cooperation in policy making, warning that “tax increases like this should never be imposed on businesses again.”