Private sector set to shrink as CBI warns Reeves against fresh tax raid

"It is now a full year since the CBI last recorded a positive reading for future expectations - underlining the depth of disillusionment in corporate Britain since Labour's election victory last summer and Chancellor Rachel Reeves's £40bn package of tax rises announced last October. The survey, which gathered responses from 877 firms, showed the consumer services sector facing the steepest decline, with retailers, wholesalers, business and professional services, and manufacturing companies also forecasting significant slowdowns."

"Firms cite the combined impact of 3.8% inflation in July, higher National Insurance contributions, and an increase in the minimum wage, alongside regulatory pressures such as Angela Rayner's Employment Rights Bill, which is set for its final reading in the House of Lords this week. The bill, which strengthens workplace rights, has been criticised by business groups for increasing costs and reducing flexibility."

Britain's private sector anticipates contraction over the coming quarter, with bosses planning cuts to hiring and investment across every major sector. A CBI monthly survey of 877 firms shows consumer services facing the steepest decline, while retailers, wholesalers, business and professional services, and manufacturing companies also forecast significant slowdowns. Firms cite 3.8% inflation in July, higher National Insurance contributions, a minimum wage increase, and regulatory pressures such as the Employment Rights Bill as drivers of higher costs and reduced flexibility. Chancellor Rachel Reeves's £40bn tax package and rumours of further measures to fill a projected £50bn fiscal hole have intensified corporate disillusionment. The CBI warns that further tax rises could undermine investment and growth and calls for lower business costs, tax certainty, and a rethink of the Employment Rights Bill.

Read at Business Matters