London (Parliament Politics Magazine) – CBI warns of negative growth expectations for the first time in 2024, with firms forecasting declines across sectors after the government’s recent budget and tax hikes.
According to the CBI’s latest Growth Indicator, the private business sector expects a decrease in activity for the three months to February 2025, with a negative growth prediction of -10%, marking the first such drop of the year.
UK firms have experienced āa decisive turn for the worseā in growth expectations, with a fresh challenge for Rachel Reeves as business confidence declines after the budget.
Business and professional services within the broader services sector are predicting a decline in activity (-7%) in the coming months. Consumer services are expected to experience a sharper fall (-33%), marking the weakest expectations in two years, while overall service volumes are set to drop by (-13%).
The CBI revealed a continued decline in private sector activity over the three months to November, with services, manufacturing, wholesale and retail all experiencing declines in business volumes, sales, or output.
Chancellor Rachel Reevesās October budget introduced Ā£40bn in tax hikes, including Ā£25bn from increased national insurance contributions (NICs) for companies, focused on stabilising public finances and improving public services.
Firms prepare for job cuts
Alpesh Paleja, the CBI Interim Deputy Chief Economist stated “As we head into 2025 expectations for growth have taken a decisive turn for the worse. Our surveys suggest that anticipated activity was already weakening heading into the October Budget and the Chancellorās announcements have left businesses with even more tough choices to make.”
He said firms are preparing to cut jobs, as hiring intentions reach their lowest levels since the COVID-19 pandemic. This may signal the impact of higher labour costs due to the expected rise on employer NICs and the national living wage.
Business leaders seek reform
The Confederation of British Industry (CBI) urges the government to “quickly and decisively to reform business rates, deliver apprenticeship levy flexibility, and boost occupational health incentives to support the health of the workforce.ā
Business leaders express concerns over the British government’s ability to deliver sustained growth in the next five years.
LCCI surveys reveal growing concerns
As reported by The Guardian, the London Chamber of Commerce and Industry (LCCI) acknowledged the government’s need to take tough decisions to repair public finances but argued that the budget and employment rights bill have created a “perfect storm” for business in the capital.
The LCCI argued that the government will fail to achieve the long-term growth it has as a cornerstone of its strategy.
A survey of LCCI members disclosed that 81% of business leaders are confident the government will not address the concerns of the business community, while 77% are unsure if the government will meet its economic growth targets.
The report from the Institute of Directors revealed that business confidence has dropped to its lowest level since the early months of the Covid-19 pandemic.
Another recent snap survey by the LCCI, which interviewed more than 200 business heads, showed almost 80% of businesses are worried that the increase in employer national insurance would harm the business. About half of the respondents expect a hiring freeze and reduced wages for the staff in the coming years.
London businesses losing trust
The CEO of the London Chamber, Karim Fatehi said, “This snap survey has confirmed our worst fears; the business community views the combined package of increased employer national insurance contributions, cuts to business rates relief and the employment rights bill as a serious threat to their operations over the coming years.”
He added London businesses are losing trust in the government’s economic growth strategy after facing a cost of living crisis, high inflation, increasing borrowing costs, and trade tensions, businesses need conditions that support growth rather than measures that limit their ability to invest, hire, and train staff.
CBI warns of economic decline
According to research by the CBIās economic consultancy, capping business property relief at Ā£1m could result in more than 125,000 job losses and a significant decline in economic activity, leading to reduced tax revenues.
The study, conducted on behalf of Family Business UK also projected a Ā£9.4bn reduction in the value of goods and services produced in the economy.