UK Business Confidence Plummets as Tax Hikes Loom

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Surveys released on Monday show that many British employers plan to increase prices and reduce their workforce due to the government's tax hikes on businesses. Confidence among small businesses has dropped to a five-year low.

The Chartered Institute of Personnel Development (CIPD) found that 90% of employers believe the finance minister's decision to raise payroll taxes in April will increase employment costs. Of this group, 42% plan to raise prices, and 32% intend to reduce headcount through layoffs or fewer hires.

A separate survey by the Federation of Small Businesses (FSB) revealed that small business confidence fell to its lowest point since early 2020, during the COVID-19 pandemic.

These findings align with other indicators showing a significant decline in business confidence since the October 30 budget announcement by the finance minister. CIPD Chief Executive Peter Cheese noted that this drop in employer sentiment was the most severe in a decade, except for the pandemic period.

The FSB survey also highlighted that about 25% of small businesses expect to shrink in size. Tina McKenzie, FSB policy chair, emphasized the urgent need for the government's growth initiatives.

Finance Minister Rachel Reeves stated that the tax increases were a temporary measure aimed at stabilizing public finances while funding essential services and investments.

Despite the UK economy's unexpected growth of 0.1% in the last quarter of 2024, the Bank of England recently halved its growth forecast for 2025 to 0.75%.

Paraphrasing text from "Reuters" all rights reserved by the original author