Business confidence worse than during Covid

Telegraph

a day ago

Business confidence has plunged to an all-time low to surpass the pandemic and Liz Truss's mini-Budget after Rachel Reeves unleashed record taxes on employers.
Bosses said they were 'frustrated' that the Chancellor had hit businesses with a barrage of cost increases while failing to improve the economic backdrop.
The survey published by the Institute of Directors (IoD) showed the share of business leaders reporting they were pessimistic about the economic outlook exceeded those who were optimistic by 72pc.
It means bosses are at their most pessimistic since the monthly survey started running in 2016, to outstrip the Covid lockdowns, fraught Brexit negotiations and the aftermath of Ms Truss's disastrous mini-Budget.
Andrew Griffith, the shadow business secretary, accused the Government of 'attacking private enterprise with the zeal of a Left-wing student union'.
He added: 'Instead of the cuts in spending which are urgently needed, this socialist Government hits businesses with higher taxes, raised energy costs and more trade-union inspired red tape.
'A year ago businesses faced a summer of uncertainty followed by massive tax hikes. Like a bad horror move franchise, the Chancellor seems determined to release a sequel.'
Businesses are slashing investment plans and expect to cut back the number of staff they employ, amid falling revenues and soaring costs.
Anna Leach, the IoD's chief economist, urged the Chancellor to 'urgently quash rumours of further tax rises for business this autumn, and accelerate planning reforms and de-regulation to restore confidence and drive growth'.
She added: 'Companies continue to battle cost increases – particularly arising from the national minimum wage and National Insurance contribution changes – and many are frustrated that while the Government has been quick to raise costs for business, it has been much slower to deliver improvements to the wider business environment.
'Last year, damaging speculation around tax rises in the lead-up to the 2024 Budget caused many firms to pause investment and hiring decisions – contributing to six months of near-zero economic growth.
'We're now living with the economic consequences of those tax hikes, even as uncertainty around future costs once again builds. With ripple effects through the economy from tax changes and signs of consumer retrenchment, many firms report that they are struggling to plan amid a cacophony of risk.'
Mel Stride, the shadow chancellor, urged Ms Reeves to 'heed the calls from the Institute of Directors and put to bed speculation about more damaging tax rises'.
The economy shrank in April and May, while unemployment is rising and job vacancies are falling as companies cut back spending.
October's £25bn raid on employers' National Insurance contributions shocked businesses. The tax rate was increased from 13.8pc to 15pc, and the earnings threshold at which it kicks in was reduced, taking in more part-time workers.
The tax rise came into force in April, alongside a 6.7pc increase in the national living wage.
Economists estimate that Ms Reeves will have to raise taxes or cut spending to the tune of £20bn or more in the Budget to maintain the buffer against her borrowing rules.
But the Government has struggled to make even modest savings, performing about-turns on welfare reform and on the winter fuel payments to pensioners.
Two thirds of businesses told the IoD they need action on taxes from the Government, with 64pc calling for help with the cost of employment. Half said they want less red tape, and 39pc said they need lower energy bills.
An HM Treasury spokesman said: 'UK business confidence is the highest in 10 years, according to a Lloyds Bank survey published only this week. Since the election, we have struck three major trade deals with the EU, US and India, more than £1bn has been invested to fix our national infrastructure and the Bank of England has cut interest rates four times.
'And because of the tax decisions we took at the Budget last year, we have been able to deliver on the priorities of the British people, from investing in the NHS to cutting lists as we deliver on the Plan for Change.'