Businesses in the United Kingdom expect a bumpy ride in the coming months because of the new government’s first annual budget.
The financial plan, which was set out by the country’s Chancellor of the Exchequer Rachel Reeves at the end of October, will have a significant negative impact on enterprises, Britain’s biggest business lobby group, the Confederation of British Industry, or CBI, said on Monday.
After surveying its member businesses, the CBI said tax rises contained in the budget mean companies now expect to scale back expansion plans, reduce workforces, and abandon recruitment drives.
The CBI’s survey, which was completed by 266 enterprises, found almost half are expecting to delay or temporarily reduce pay rises. Some 62 percent are planning to hire fewer people, and around six businesses in 10 believe the budget will not make the UK more attractive for investment.
Rain Newton-Smith, the CBI’s director-general, said before the budget, companies had not been expecting tax hikes, especially the increase in national insurance, which enterprises pay the government to help fund workers’ health and social security needs.
“Tax rises like this must never again simply be done to business,” she said at the CBI’s annual conference on Tuesday. “Even where the risk isn’t critical, firms that have been through really tough years are now in damage control again.”
‘Heavy burden’
Newton-Smith said the tax hikes “caught us all off guard” and will “put a heavy burden on business”.
Her comments were the latest in a series of scathing assessments of the new government’s first budget.
Employers have also been highly critical of the new Labour Party’s decision to raise the country’s minimum wage and its plans to protect workers’ rights with new legislation.
Reeves said she had no choice but to raise taxes after the government found a 22-billion-pound ($27.7 billion) “black hole” in the country’s finances after it came to power following the general election on July 4.
Reeves’ budget increased taxes by more than 40 billion pounds, with most of that money coming from the increase in the amount of national insurance that employers must pay.
Newton-Smith said the budget will significantly dent the profitability of many UK businesses, which is bad news for everyone.
“Profits aren’t just extra money for companies to stuff in a pillowcase,” she said. “Your future profitability shapes your ability to invest and grow sustainably.”
Newton-Smith called on the government to borrow more money to pay for services, instead of forcing companies to contribute more. She also called for cuts in red tape to ensure companies enjoy the benefits of speedier planning decisions, simplified tax rules, and quicker adoption of technology.
