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Tax rises in the autumn Budget are undermining investment among UK companies, according to the head of one of Britain’s most prominent business groups.
Rain Newton-Smith, chief executive of the Confederation of British Industry, will warn in a speech on Monday that the measures announced last month have made it harder for businesses to “take a chance” on hiring new people.
However, Chancellor Rachel Reeves is expected to tell the group there was “no alternative” to tax rises as she holds firm against criticism of the autumn financial statement.
Speaking to the CBI’s annual conference in London, she will say: “Across the board, in so many sectors, margins are being squeezed and profits are being hit by a tough trading environment that just got tougher.
“And here’s the rub, profits aren’t just extra money for companies to stuff in a pillowcase. Profits are investment… When you hit profits, you hit competitiveness, you hit investment, you hit growth.”
Ms Newton-Smith will add: “What really defines growth is the decisions made in boardrooms up and down the country.
“It’s CFOs and CEOs asking: can we afford to invest? Can we afford to expand? Can we afford to take a chance on new people?
“Well after the Budget, the answer we’re hearing from so many firms is still ‘not yet’.”
Labour made economic growth a central part of its pitch to voters in the general election, and has repeatedly pledged to help boost business investment since entering Government.
In the October Budget, Chancellor Rachel Reeves announced a nearly £70 billion uplift in public spending, partly funded by sharp increases in business taxes such as employer national insurance contributions.
Labour also raised the minimum wage, in a move praised by workers’ groups and unions, but which businesses have said will force them to pass on some costs to consumers, hire fewer people or make less profit.
In her speech, Ms Newton-Smith will point to a recent survey by the body which found almost two-thirds of companies think the Budget will damage UK investment.
The event is also due to be attended by the Chancellor, who is expected to take part in an onstage talk with Scottish Power chief executive Keith Anderson.
The Guardian reported Ms Reeves is expected to use the conference to say: “I have heard lots of responses to the Government’s first budget but I have heard no alternatives.”
Ms Newton-Smith will say: “Tax rises like this must never again be simply done to business.
“That’s the road to unintended consequences. From now on we need an elevated partnership for a higher purpose.