Labour’s tax bomb budget has sent confidence crashing to its lowest levels since Covid as business leaders mourn the loss of their ‘natural optimism’.
The shocking new findings published in a survey of the Institute of Directors (IoD) reveal the entrepreneurs are unhappy at Chancellor Rachel Reeve’s record tax rises and shrinking economy.
Among the grievances cited are also the cutting off of investment plans and the slashing of pay rises to cope with a £25bn increase in National Insurance.Â
News of the discontent has been compounded by other blows to Starmer’s government over the last week which include the resignation of his transport secretary Louise Haigh after details of a previous fraud conviction came to light.
And they also include the Prime Minister being criticised for spending a substantial time overseas in countries like Azerbaijan, Brazil, France and Hungary rather than focussing on issues at home.
Andrew Griffith, the Conservative business secretary, said the survey showed ‘a catastrophic loss of business confidence under this Government to an all-time low, bar the pandemic’.
He added: ‘Business leaders tend to have a natural optimism, but the summer of “trash talking” the economy, Labour’s “jobs tax” and the trade union-inspired Employment Bill are knocking the stuffing out of their confidence.
‘It is jobs and investment that will pay the price.’
Charities have also urged Chancellor Rachel Reeves to spare them from her £25billion hike in employers’ National Insurance
The IoD’s optimism tracker plummeted to minus 65 in November – sharply down from minus 52 in October and the lowest score since April 2020
The IoD’s optimism tracker plummeted to minus 65 in November – sharply down from minus 52 in October and the lowest score since April 2020.
Sir Tim Martin, Wetherspoons boss, said: ‘All democratic governments need to manage the relationship between an economic horse and a public services’ cart – society needs both. This Government has disincentivised and discouraged the horse, as the IOD survey shows.’
Only last week, the first economic figures published since the Chancellor’s damaging tax raid on employers showed that the private sector was shrinking.
It came after Ms Reeves hiked the rate of employer National Insurance contributions to 15 per cent and reduced the threshold for paying the tax from £9,100 to £5,000 – despite an election pledge not to increase National Insurance ‘for working people’.
And more than 80 retail bosses wrote to the Chancellor to warn that the move would cost jobs and lower wages.
In the first half of this year, the UK enjoyed the strongest growth in the G7 group of advanced economies. But after Labour took office growth shrank to just 0.1 per cent in the third quarter, the joint second-worst in the group.
Charities also said they would be forced to axe services, lay off staff and even shut down following the budget announcement.
They urged Chancellor Rachel Reeves to spare them from her £25billion National Insurance hike.
After Labour took office growth shrank to just 0.1 per cent in the third quarter, the joint second-worst in the group
Ms Reeves acknowledged that businesses would have to absorb the costs of paying more national insurance or giving out smaller pay rises.
Conservative former minister Sir Desmond Swayne warned MPs: ‘Investment requires a measure of optimism, not the collapse in business confidence that (Ms Reeves) has engineered. She would have done better to stress some of the positives that she inherited, wouldn’t she?’
Ms Reeves replied: ‘It’s good to be explained how to do my job by one of the members opposite who crashed our economy.
‘£63.5 billion of investment into the UK were announced at our international investment summit, investment in life sciences, investment in data centres and digital, investments in clean energy, because businesses have confidence that this Government is bringing stability back to our economy, and working with businesses to seize the opportunities.
‘I am really excited about doing that in all parts of our country and working with business to do so.’
A separate survey by the London Chamber of Commerce and Innovation (LCCI) also shows collapsing business confidence in the Government’s economic programme.
One in five family businesses surveyed by the trade body said they would close rather than pass on their business to the next generation, due to the inheritance tax changes.
Meanwhile just one in four LCCI members said they had confidence the Government would deliver growth.
Minister for defence procurement Maria Eagle said that departmental costs would increase by £216million as a result of changes outlined in the Budget
Tory MP Dr Caroline Johnson accused Labour of having ‘given with one hand and taken away with another’ after almost 10 per cent of its defence budget boost was shown to have been cancelled out by the increase in employers’ National Insurance contributions
Anna Leach, chief economist at the IoD, told of how the Budget risked wiping out private sector economic growth.
She said: ‘Far from fixing the foundations, the Budget has undermined them, damaging the private sector’s ability to invest in their businesses and their workforces.
‘The clash between government intentions to address inactivity and the sharpness of the increase in employment costs is jarring. There’s now a significant risk of growth stalling across the private sector due to the extent of the reset required by business.’
Karim Fatehi, chief executive of LCCI, said: ‘This snap survey has confirmed our worst fears; the business community views the combined package of increased employer National Insurance cntributions, cuts to business rates relief and the Employment Rights Bill as a serious threat to their operations over the coming years.’
Last month, the British Medical Association issued a strongly-worded statement calling for GP practices to be given funding to cover the full extra costs of the NI increase.
It said the BMA was ‘astonished at the suggestion that GPs are not part of the NHS family and recognises the existential threat to NHS general practice across the UK by the significant increase of the National Insurance and national living wage burden on general practice after many years of under-investment’.
And another of the latest victims of the tax raid to emerge is the UK’s defence budget boost – with a 10th of this being wiped out, the Mail exclusively revealed.
Ministers admitted the 1.2p rise would impact the Ministry of Defence directly – costing the underfunded department £216million in 2025-26 of its £2.9billion defence budget boost.
A FTSE 100 retail chief told The Telegraph the Labour Government was not living up to its promises to restore stability and growth.
He added: ‘If you take £25bn out of business profits and reduce tax relief for entrepreneurs and British farm businesses and threaten new labour regulations making it riskier to employ people, it would be amazing if confidence went up.
‘Labour promised stability and growth and so far have produced gloom and surprise. I do not think it is too late to repair the damage but it requires a significant change of tone and a lot less PR posturing.
‘There is nothing fundamentally worse about the UK economy, but confidence in its stewardship is draining away.’