Businesses, trade bodies and economic analysts have urged Chancellor Rachel Reeves to reconsider elements of Labour’s economic programme ahead of the Autumn Budget, saying recent tax changes and rising borrowing costs risk forcing more shop closures and large job losses across the UK.
The calls intensified after Reeves acknowledged the economy was “stuck” while announcing a shake-up of business rates intended to rebalance the tax burden between bricks-and-mortar retailers and online competitors. Firms say the changes, combined with an unexpected £25 billion rise in employers’ National Insurance contributions and other levies, have left retailers and other employers struggling to plan.
The British Retail Consortium (BRC) said Reeves’s proposals could force about 400 large shops to close and put up to 100,000 jobs at risk if anchor stores that generate footfall are hit by higher costs. The group also estimated local authorities’ business rates receipts from retail would fall by more than £100 million a year under the reforms.
Helen Dickinson, chief executive of the BRC, said excluding very large shops from a higher business-rates band would not cost the Exchequer but would protect about 400 stores and the communities they support. "Failure to act risks shuttering hundreds more stores, costing jobs, communities and the economy far more in the long run," she said.
Retailers have already announced job cuts that industry figures link to the fiscal environment. B&Q proposed reducing its headcount by 672 roles "just yesterday", and other large chains, including Tesco and Morrisons, have made reductions since last year’s Budget, industry sources said.
Critics from across the political and policy spectrum blamed a mix of factors for the economic strain. Julian Jessop, economics fellow at the Institute of Economic Affairs, said the UK was trapped in a "low growth, high tax" cycle and that government failures to control public spending and restore investor confidence were partly to blame. Conservative business spokesman Andrew Griffith said Reeves bore responsibility, adding: "If the economy is stuck, there is no doubting who’s been spreading the glue."
Some business leaders were more forthright. Hugh Osmond, the entrepreneur behind Pizza Express, criticised Labour’s employer National Insurance increases and forthcoming worker-rights legislation, saying the measures were ill targeted for promoting job creation.
Reeves has defended the approach as necessary to level the playing field between online and physical retailers and to support small firms, and small businesses welcomed aspects of the rates overhaul. But the policy trade-offs have alarmed larger retailers that argue the changes could undermine town-centre footfall by penalising anchor stores.
Economic analysis has put fresh focus on the UK’s financing costs. New research cited by industry groups shows the UK now has the highest borrowing costs among wealthy OECD nations, a situation the Resolution Foundation attributed to "sticky" inflation. James Smith, research director at the Resolution Foundation, said the Chancellor should use the Budget to strengthen the fiscal position and avoid measures that would stoke inflation, and suggested the Bank of England could help by slowing its gilt sales in line with achieving its inflation target.
The policy dispute has had tangible investment consequences. Pharmaceutical group Merck reportedly pulled a planned £1 billion investment in a new London research centre, citing "the challenges of the UK not making meaningful progress towards addressing the lack of investment in the life science industry." The company’s decision came a day after business groups intensified calls for a Budget that would arrest what they see as falling investor confidence.
Industry and policy groups said urgent action was needed to prevent a wave of closures that could hollow out high streets and reduce tax receipts further. Some proposed narrowly targeted adjustments, such as excluding large "anchor" stores from a higher rates band, which proponents say could be cost-neutral for the Exchequer while stabilising town centres and protecting jobs.
Reeves faces a difficult balancing act ahead of the Autumn Budget: protect high streets and preserve investment incentives while maintaining fiscal credibility and addressing inflationary pressures. The Chancellor has signalled growth is her "number one mission," but firms and analysts say immediate, concrete measures will be required if closures and further job cuts are to be avoided.
As ministers prepare spending plans, trade groups and thinktanks will be watching closely for any changes that address both rising business costs and the broader questions about investor confidence and public finances that analysts say are driving Britain’s higher borrowing costs.