Almost two-thirds of UK companies will postpone hiring plans due to the Chancellor’s £40bn tax hike, according to a new poll by the Confederation of British Industry (CBI).
A survey of 266 business leaders found that 62% intend to reduce employment, nearly half expect layoffs, and 46% plan to delay employee wage increases.
The findings underline the growing frustration among businesses, particularly in the retail and hospitality sectors, over changes such as increases in employers’ National Insurance contributions and reductions in the income limit for contributions. These measures come alongside an increase in the national minimum wage and sweeping changes to workers’ rights, adding further financial pressures.
Rain Newton-Smith, the CBI’s chief executive, is expected to criticize the government at the CBI’s annual conference. Speaking directly to Chancellor Rachel Reeves, she will argue that tax increases undermine the UK’s competitiveness and growth.
“If you’re profitable, you’re getting competitive, you’re hitting investment, you’re growing,” Newton-Smith said. He will emphasize that profits are important for reinvestment in communities, workforce training, and economic growth.
Impact on Businesses and Employment
CBI poll reveals strong response to Budget:
Hiring Hiring: 62% of businesses plan to hire fewer employees.
Layoffs: 47% expect layoffs.
Delayed Pay Increase: 46% expect to hold a pay raise.
Businesses in sectors such as retail and hospitality, which rely heavily on low-wage, part-time workers, are particularly affected by the reduction in the National Insurance cap and the rise in the minimum wage.
The British Retail Consortium estimates that the Budget measures will add £7bn to business costs, with major retailers such as Tesco, Marks & Spencer, and Boots already warning of inevitable job cuts.
Newton-Smith will also face changes to inheritance tax affecting farmers, highlighting fears that many may not be able to pass their businesses on to the next generation. Business leaders are expected to warn the government that rising costs could discourage investment in less developed regions, undermining efforts to tackle the UK’s unemployment crisis.
The Chancellor and ministers are expected to face growing pressure from high street leaders, with a meeting planned this week between shopkeepers and Gareth Thomas, minister for services, small businesses and exports. Business leaders plan to raise concerns about job losses and job cuts, saying higher costs could stifle growth and investment across the country.
As the government prepares to release a white paper on tackling unemployment and increasing employment, it faces a balancing challenge. Newton-Smith’s speech is expected to call for more cooperative policy-making, warning: “Tax increases like this must not be done again in business.”
