Labour’s Budget tax bomb will hit development, funding and jobs, enterprise chiefs warn – as Rachel Reeves’ £25billion National Insurance raid undermines her purpose of boosting financial development

Labour‘s Budget tax bomb will hit growth, investment and jobs, the CBI is set to warn.

The employers’ organisation says that the £25billion National Insurance raid has directly undermined the Chancellor’s stated aim of boosting economic growth.

Addressing the CBI’s annual conference today, chief executive Rain Newton-Smith will say that the worst-hit industries such as retail and hospitality have been pushed into ‘crisis containment’, while other sectors are now focusing on ‘damage control’ rather than investment following the hit to their bottom line.

She will remind Rachel Reeves that profit is ‘not a dirty word’ and growth is impossible unless business is allowed to prosper.

‘Profits aren’t just extra money for companies to stuff in a pillowcase,’ she will say. ‘Profits are investment. When you hit profits, you hit competitiveness, you hit investment, you hit growth.’

Ms Newton-Smith will welcome the political stability brought by Labour’s huge majority but warn that the Government’s vision for growth remains ‘in the distance’.

A survey of CBI members found that half are now looking to cut jobs, while two-thirds are slashing pre-Budget recruitment plans. Businesses bore the brunt of £40billion of tax rises unveiled last month. Some firms also face rising costs as a result of an increase in the minimum wage and new employment rights.

Ms Newton-Smith said business had been ‘caught off guard’ by the scale of the changes to employers’ NI. 

Rachel Reeves’ Budget tax hikes will hit growth, investment and jobs, business chiefs are warning

CBI chief executive Rain Newton-Smith will say in a speech today that worst-hit industries such as retail and hospitality have been pushed into ‘crisis containment’, and that growth is impossible unless businesses are allowed to prosper

‘Tax rises like this must never again be simply done to business,’ she will say, adding: ‘That’s the road to unintended consequences.’

Ms Reeves has declared that economic growth is her ‘top priority’ and insists Labour will meet its manifesto pledge to make the UK the fastest growing economy in the G7.

But the Office for Budget Responsibility downgraded its growth forecasts for the final years of the decade in the wake of the Budget. Official figures covering the first three months of Labour’s tenure show growth fell to 0.1 per cent, down from 0.5 per cent the previous quarter.

Sir Keir Starmer acknowledged the growth figures were ‘not good enough’ and pledged to redouble efforts to boost investment. Ms Newton-Smith will also warn that the Budget has placed a ‘heavy burden’ on businesses looking to invest. 

‘When firms I speak to want to be creating more opportunities, more investment, more training in their local communities…instead so many – especially in retail and hospitality – have gone into crisis containment,’ she is set to say.

‘Even where the risk isn’t critical, firms that have been through really tough years are now in damage control again. They are looking with heavy hearts to cut training and investment, delay decarbonisation projects, or pass on costs to customers.’

The CBI’s warning is the latest to raise concerns about Labour’s stewardship of the economy. A monthly business survey has suggested that activity across the UK’s private sector contracted in the first weeks of November amid a drop in firms’ confidence.

Retailers including Tesco, Sainsbury’s and Marks & Spencer also say they will face a £7billion hike in their costs due to the Budget policy changes and that job losses are ‘inevitable’. 

A survey of CBI members found that half are now looking to cut jobs, while two-thirds are slashing pre-Budget recruitment plans (file photo)

The UK performance in the three months to September was worse than analysts had expected – with the final month seeing a 0.1 per cent fall in GDP

A fall in production sparked the dip in GDP seen in September

Tory MP Kevin Hollinrake said Ms Reeves’s gloomy talk about her economic inheritance, coupled with huge tax rises, was now doing real harm to the economy.

‘She has talked the economy down, talked the UK down and piled in with £25billion of tax increases on business. They are the people who invest to grow our economy. These are incompetent decisions that are going to be counterproductive when it comes to growing the economy.’

A Government spokesman said Ms Reeves had delivered a ‘once- in-Parliament Budget to wipe the slate clean and deliver change by investing to repair the NHS and rebuild Britain, while ensuring working people don’t face higher taxes in their payslips’.

They acknowledged she had made ‘difficult choices’, but added: ‘The Government is determined to go for growth and to work in partnership with businesses to invest in Britain’s future so we can make every part of the country better off.’