Business confidence crashes in blow for Rachel Reeves as Labour’s tax increases loom_Nhy
Business confidence has plunged to the lowest level outside of Covid following the Budget, damning polls reveal.
Rachel Reeves has been warned that her hated £25 billion increase raid on employers’ national insurance contributions (NICs) will send job creation in the ‘wrong direction’ as firms are ditching hiring plans and raising prices to cover higher taxes.
Employers are also facing pressure caused by the rise in the national minimum wage and a raft of new ‘jobs killing’ workers’ rights being introduced by Labour.
The Federation of Small Businesses (FSB) said its headline confidence metric fell 40.1 points to -64.5 points in the last three months of 2024, compared to the quarter before.
And it was the lowest reading since the first three months of 2020, when the Covid pandemic spread across the UK.
Confidence across all sectors has plunged, but most acutely in accommodation and food services, which dropped to -111.0 points, and the retail sector, which fell to -94.2 points.
Pubs and shops will be especially hurt by the increases due to ‘double whammy’ changes to NICs disproportionately impacting businesses that rely on part-time workers.
Tina McKenzie, FSB’s policy chair, said: ‘Small firms are understandably nervous about their prospects as 2025 gets underway.’
Rachel Reeves (pictured) has been warned that her hated £25 billion increase raid on employers’ national insurance contributions (NICs) will send job creation in the ‘wrong direction’
Employers are also facing pressure caused by the rise in the national minimum wage and a raft of new ‘jobs killing’ workers’ rights being introduced by Labour. Pictured: File photo
The Federation of Small Businesses (FSB) said its headline confidence metric fell 40.1 points to -64.5 points in the last three months of 2024, compared to the quarter before. Pictured: File photo
And in another blow for Ms Reeves, a separate survey revealed that almost a third of firms plan to make redundancies or hire fewer workers to offset higher costs.
The research from the Chartered Institute of Personnel and Development (CIPD) further lays bare the difficult choices being considered by businesses ahead of the introduction of higher costs in April.
Major chains to announce job cuts include Tesco and Sainsbury’s, which together announced nearly 3,500 redundancies this year.
Peter Cheese, chief executive at the CIPD, said: ‘These are the most significant downward changes in employer sentiment we’ve seen in the last ten years, outside of the pandemic.’
Describing firms’ approach to hiring as ‘heading in the wrong direction’, Cheese said it was evident that many businesses are ‘now planning to reduce headcount, raise prices and cut investment in workforce training.’
In its survey of 2,000 companies, CIPD also found that two in five plan to raise prices, in a setback for squeezed consumers.
That is unlikely to boost confidence among households feeling nervous about their jobs and wages.
Tory business spokesman Andrew Griffith, said: ‘This latest research joins a pattern of reports all demonstrating that business confidence is on the floor and a huge proportion of businesses are likely to cut jobs or hiring.
Confidence across all sectors has plunged, but most acutely in accommodation and food services, which dropped to -111.0 points, and the retail sector, which fell to -94.2 points. Pictured: File photo
Tina McKenzie (pictured), FSB’s policy chair, said: ‘Small firms are understandably nervous about their prospects as 2025 gets underway.’
‘A change of course by the Government is long overdue. You can’t be serious about growth if you impose a jobs tax followed by the union-inspired, jobs killing employment bill.’
Gloom over the economy is growing after the Bank of England slashed its prediction for UK growth this year by half, to just 0.75pc.
Ms Reeves is likely to face pressure to put up taxes again as the Office for Budget Responsibility prepares new forecasts to be published in March.
Economists worry that with the outlook for growth revised down, the Chancellor’s ‘headroom’ to balance the books will be wiped out leaving her with a public finance black hole to fill.
