By tf-lawyer.com On October 11, the Confederation of British Industry (CBI) released a report indicating that many companies have paused hiring and delayed investment decisions due to market concerns over potential tax increases in the government’s upcoming budget.
The Labour government is set to unveil its first fiscal budget at the end of October. Analysts are predicting that, given the significant fiscal deficit and rapidly increasing government debt, the new administration will be forced to cut spending and hike taxes.
Prime Minister Keir Starmer and Chancellor of the Exchequer Rachel Reeves have both hinted that “painful” decisions will need to be made to stabilize the nation’s finances.
There is growing debate in the market about what tax measures the budget will propose, particularly since the government has committed to avoiding increased burdens on “working people” and ruled out any hikes in National Insurance or income tax.
Ben Jones, chief economist at the CBI, noted the numerous uncertainties surrounding the government budget, leading some businesses to postpone their decisions until clearer signals are provided by the government.
Industry bodies such as the British Chamber of Commerce and the Institute of Directors emphasized the necessity of fiscal consolidation but argued that the UK must differentiate between short-term and mid-term goals. For the UK, promoting economic growth remains the top priority in the short term, while fiscal consolidation should be achieved in the medium term.
Anna Leach, chief economist at the Institute of Directors, highlighted that recent surveys show a decline in business confidence and investment expectations among UK entrepreneurs. The potential for tax increases, international competition, and cost pressures have contributed to their concerns about the prospects for economic growth in the UK.
