Recent data from the CBI reveals that approximately two-thirds of UK businesses are intending to scale back their recruitment efforts. This decision comes in response to unexpected tax hikes announced in the autumn Budget, which have made it more challenging for businesses to expand, invest, and hire new employees. Rain Newton-Smith, the chief executive of the CBI, highlighted these concerns during the organization’s annual conference in London.
Newton-Smith emphasized that profits are essential for businesses to invest in growth and should not be viewed negatively. However, she noted that the Budget measures have created a tougher trading environment for UK businesses, leading to squeezed margins and reduced profitability across various sectors.
Following the Budget announcement by Chancellor Rachel Reeves in October, many firms are reconsidering their hiring and investment plans. Newton-Smith revealed that half of UK businesses are planning to reduce staff, while nearly two-thirds are scaling back their recruitment intentions.
The rise in employer National Insurance Contributions (NICs) and the increase in the National Living Wage have caught many businesses off guard, placing a significant burden on their operations. Newton-Smith expressed concerns that these changes have made it harder for firms to invest, expand, and take risks on new employees.
Additionally, rising business costs, including changes to inheritance tax reliefs, are further exacerbating the financial challenges faced by UK businesses. Newton-Smith urged the government to consider the impact of tax rises on businesses and to prioritize reforms to support companies in navigating these difficult economic conditions.
Looking ahead, Newton-Smith called for a simpler planning system, less complex tax rules, and a reduction in regulatory red tape to support business growth and innovation. She also highlighted the importance of international partnerships in the face of global conflicts and rising protectionism.
As the UK economy continues to navigate these challenges, Newton-Smith emphasized the need for government support and flexibility to address the concerns raised by businesses. The CBI chief remains optimistic about the country’s economic prospects but stresses the importance of proactive measures to sustain growth and stability.
PA Media contributed to this report.
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