Introduction: Budget tax rises will hurt hiring, say bosses
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
UK businesses are warning today that the tax rises in last month’s budget have put a ‘heavy burden’ on them, putting firms off hiring.
Business leaders are gathering at the Queen Elizabeth II Centre in central London for the Confederation of British Industry (CBI)‘s annual conference. They’ll hear from chancellor Rachel Reeves, and leader of the opposition Kemi Badenoch, after a breakfast with Bank of England (BoE) governor Andrew Bailey.
And the message from the CBI is that Reeves’s first budget will hurt profits, leading to lower investment and growth.
A survey conducted by the CBI after the budget found that nearly two-thirds of firms thought the budget will damage UK investment with half of firms looking to reduce headcount as a result.
CBI CEO Rain Newton-Smith will tell firms today that “tax rises like this must never again simply be done to business.”
She’s expected to say:
“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.
The rise in National Insurance and the stark lowering of the threshold, caught us all off guard.
Set alongside the expansion and rise of the National Living Wage – which everyone wants to accommodate – and the potential cost of the Employment Rights Bill changes… they put a heavy burden on business.”
She will then warn:
When you hit profits, you hit competitiveness, you hit investment. You hit growth.
Data last Friday showed that the UK private sector is stagnating this month, following the budget at the end of October.
The CBI, which was hit by claims of sexual misconduct and a ‘toxic culture’ last year, is now hoping to have a greater influence over government policy again. Newton-Smith is expected to commend the government for “drawing the curtain on a near decade of instability” but urge them to shift from “consultation to co-design”.
Reeves’s budget, at the end of October, included £40bn of tax rises to boost public spending, including £25bn from increasing employer national insurance contributions.
The conference will be wrapped up by CBI president Rupert Soames. Back in February, he told us that the Guardian’s revelations about sexual misconduct at the lobbying group were “an appalling shock” that tipped it into a “near-death experience”.
Soames said the scandal had triggered an existential crisis; today’s conference will be a test of how well his rescue operation is going.
Among the speakers at today’s conference is the US Embassy’s Deputy Chief of Mission, Matthew Palmer, who will discuss the US political situation.
Also coming up
The Bank of England are holding a conference today too, with economists and other ‘watchers’ of the UK central bank – we’ll be watching for any hints on how quickly it will keep cutting interest rates.
Financial markets will be digesting Donald Trump’s nomination of Scott Bessent, a billionaire hedge fund manager, to be the next US Treasury secretary. Bessent is seen as a Wall Street-friendly pick.
The agenda
-
9am GMT: Bank of England deputy governor Clare Lombardelli speaks at BoE Watchers’ conference
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10.05am GMT: Opening keynote address at CBI conference from Rain Newton Smith
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Noon GMT:
-
1.30pm GMT: Conservative leader Kemi Badenoch speaks at CBI’s annual conference
-
4.10pm GMT: CBI holds fireside chat with ‘senior cabinet minister’ (probably Reeves)
Key events
The US dollar is dipping this morning after Donald Trump picked hedge fund manager Scott Bessent to be the next US Treasury secretary.
This has lifted the pound up by almost half a cent, to $1.257, away from last Friday’s six-month low.
The euro, which hit a two-year low last week, is up almost half a cent too, at $1.045.
Jim Reid of Deutsche Bank says markets are reacting constructively to the choice of Bessent. He told clients:
Bessent, a hedge fund CEO, is known to be a fiscal hawk so this should ease some of the more extreme deficit fears as he has advocated a 3% deficit by 2028.
In practise that will be extremely tough but for now the market can be a bit relieved. He is also thought to be less extreme on trade policy than some of his rivals for the job.
CBI chief executive Rain Newton-Smith has spoken to Radio 4’s Today Programme about the group’s concerns over the budget, ahead of today’s conference.
Q: Rachel Reeves will say she’s heard “no alternative” to her plans, what’s your response?
Newton-Smith says the business leaders she’s spoken to have said the decisions made the budget make it harder for them to invest and to hire people.
Business investment growth is weaker because of the decisions taken in the budget, she warns.
Q: If more money for public services is needed, isn’t it fair to raise it from companies making billions of pounds in profits?
Newton-Smith says “no-one is questioning” that tax rises are needed to fund public services.
But the challenge with increased national insurance contributions (NICs) is that hits all businesses before they’ve made a profit, so it leads to “serious” pain on businesses.
The CBI wants the government to “double-down” on measures to help businesses.
That could include reforming business rates to remove pressure on businesses, such as in aviation and hospitality.
The industrial strategy must make it easy for businesses to invest and hire.
Q: Were Labour honest with business in the run-up to the Budget?
The chancellor did talk about the need for tough choices, Newton-Smith points out.
But… lowering the NICs threshold hits businesses offering opportunities to people entering the labour market for the first time, she adds.
Greggs: Budget tax rises won’t slow our expansion
The boss of Britain’s Greggs has pledged that its expansion plans will not be derailed by the new Labour government’s tax raising budget.
Greggs CEO Roisin Currie has told Reuters said that although she supported higher wages, changes to tax thresholds were an unwelcome surprise.
Currie said the measures would increase its annual costs by tens of millions of pounds, but also predicted that any customer price rises likely to only be “pennies”.
Currie says:
“Our shop growth plan, our supply chain investment, none of that changes. We are still absolutely going for growth.”
Currie also ruled out slashing the bonus distributed to employees to cover the costs of the budget, saying the bonus was “absolutely sacred”.
Kingfisher: NICS increase will cost us £31m
DIY chain Kingfisher has blamed the budget for hitting consumer confidence, and revealed that increases to employer national insurance contributions will cost it £31m.
Kingfisher has slightly lowered its earnings guidance this morning, it now expects adjusted pre-tax profits to be between £510m to £540m, down from £510m-£550m previously.
Thierry Garnier, chief executive officer of Kingfisher, says:
“Overall trading in the third quarter was resilient. Improved performance in August and September was offset by the impact of increased consumer uncertainty in the UK and France in October, related to government budgets in both countries.
Garnier adds that “recent political and macroeconomic developments” have layered incremental uncertainty onto the near-term outlook in its markets.
Reeves to defend her budget to the CBI
Rachel Reeves is expected to tell business leaders that they have offered “no alternatives” to her plans, in a defiant defence of her tax-raising budget today.
Reeves will tell the CBI’s annual conference in Westminster that no one has offered a better solution to the challenging situation left behind by the previous, Conservative government.
“I have heard lots of responses to the government’s first budget but I have heard no alternatives,” she is expected to say.
“We have asked businesses and the wealthiest to contribute more. I know those choices will have an impact. But I stand by those choices as the right choices for our country: investment to fix the NHS and rebuild Britain, while ensuring working people don’t face higher taxes in their payslips.”
Here’s the full story:
Introduction: Budget tax rises will hurt hiring, say bosses
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
UK businesses are warning today that the tax rises in last month’s budget have put a ‘heavy burden’ on them, putting firms off hiring.
Business leaders are gathering at the Queen Elizabeth II Centre in central London for the Confederation of British Industry (CBI)‘s annual conference. They’ll hear from chancellor Rachel Reeves, and leader of the opposition Kemi Badenoch, after a breakfast with Bank of England (BoE) governor Andrew Bailey.
And the message from the CBI is that Reeves’s first budget will hurt profits, leading to lower investment and growth.
A survey conducted by the CBI after the budget found that nearly two-thirds of firms thought the budget will damage UK investment with half of firms looking to reduce headcount as a result.
CBI CEO Rain Newton-Smith will tell firms today that “tax rises like this must never again simply be done to business.”
She’s expected to say:
“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.
The rise in National Insurance and the stark lowering of the threshold, caught us all off guard.
Set alongside the expansion and rise of the National Living Wage – which everyone wants to accommodate – and the potential cost of the Employment Rights Bill changes… they put a heavy burden on business.”
She will then warn:
When you hit profits, you hit competitiveness, you hit investment. You hit growth.
Data last Friday showed that the UK private sector is stagnating this month, following the budget at the end of October.
The CBI, which was hit by claims of sexual misconduct and a ‘toxic culture’ last year, is now hoping to have a greater influence over government policy again. Newton-Smith is expected to commend the government for “drawing the curtain on a near decade of instability” but urge them to shift from “consultation to co-design”.
Reeves’s budget, at the end of October, included £40bn of tax rises to boost public spending, including £25bn from increasing employer national insurance contributions.
The conference will be wrapped up by CBI president Rupert Soames. Back in February, he told us that the Guardian’s revelations about sexual misconduct at the lobbying group were “an appalling shock” that tipped it into a “near-death experience”.
Soames said the scandal had triggered an existential crisis; today’s conference will be a test of how well his rescue operation is going.
Among the speakers at today’s conference is the US Embassy’s Deputy Chief of Mission, Matthew Palmer, who will discuss the US political situation.
Also coming up
The Bank of England are holding a conference today too, with economists and other ‘watchers’ of the UK central bank – we’ll be watching for any hints on how quickly it will keep cutting interest rates.
Financial markets will be digesting Donald Trump’s nomination of Scott Bessent, a billionaire hedge fund manager, to be the next US Treasury secretary. Bessent is seen as a Wall Street-friendly pick.
The agenda
-
9am GMT: Bank of England deputy governor Clare Lombardelli speaks at BoE Watchers’ conference
-
10.05am GMT: Opening keynote address at CBI conference from Rain Newton Smith
-
Noon GMT:
-
1.30pm GMT: Conservative leader Kemi Badenoch speaks at CBI’s annual conference
-
4.10pm GMT: CBI holds fireside chat with ‘senior cabinet minister’ (probably Reeves)
