Business Leaders Urge UK Chancellor to Halt Tax Increases Amid Economic Slump

Business chiefs have urged UK Chancellor John Healey to refrain from imposing any new taxes on companies in the upcoming budget, as recent figures indicate a continued slump in the private sector under the Labour government. The Confederation of British Industry (CBI) specifically called for a "clear red line" to be drawn under any further increases in the costs of hiring, investing, or conducting business.

Firms are already contending with a range of increased expenses, including higher employer national insurance contributions, minimum wages, and costs associated with business rates reform and new worker rights. Many of these pressures were introduced under Healey's predecessor, Rachel Reeves. Fears are mounting that the current Chancellor may resort to further tax increases, potentially adding to the £75 billion already raised under Reeves, to balance the budget amidst growing spending demands and Labour's reluctance to address rising welfare expenditures.

The latest CBI survey reveals that businesses anticipate a decline in private sector activity for the three months leading up to December, extending a period of negative sentiment that began around the time of Reeves's initial budget in 2024. Activity also reportedly decreased in the preceding three-month period to September.

Alpesh Paleja, CBI deputy chief economist, stated that the outlook for growth remains subdued. "Cost pressures remain strong, especially around energy and employment," he said, "and, coupled with weak demand, this continues to put pressure on margins, recruitment and investment plans."

Paleja added that uncertainty surrounding the upcoming budget is also hindering activity in certain sectors. "Against the backdrop of renewed fiscal pressures, the Budget must draw a clear red line under any more rises in the cost of hiring, investing and doing business," he urged. "The Chancellor must focus on easing the cumulative burden of costs, as an entry point to spurring dynamism and activity."

As specific measures, Paleja suggested removing green levies from energy bills, reducing employer national insurance contributions, and establishing a clear strategy for business rates reform. He posited that these actions would be crucial steps in rebuilding business confidence and steering the country toward sustained growth.

These appeals from the CBI, Britain's largest business organization, follow similar calls from across the corporate sector aimed at alleviating the burden on struggling companies. In addition to domestic costs, businesses are facing significant increases in energy and fuel prices, exacerbated by global inflation driven by geopolitical events. This inflationary pressure is likely to prompt the Bank of England to raise interest rates, potentially adding further strain.

Despite the resilience shown by British firms in the first half of the year, the overall jobs market has not improved. Recent official figures indicate a reduction of 200,000 in the workforce since Labour took office.