Leading business figures have voiced strong criticism of the Labour party’s recent tax policies, arguing that they are stifling job creation and hindering economic growth. The Confederation of British Industry (CBI) has warned that the UK faces another period of sluggish expansion, attributing this to persistent weakness in the private sector and a lack of bold choices by the government.
Key takeaways
- Business chiefs accuse Labour of failing to make ‘bold choices’ to boost the economy.
- The CBI predicts another sluggish period of expansion for the UK.
- Tax rises are seen as hitting jobs and growth, with household spending impacted by weak living standards and subdued business investment.
Economic outlook dims amid tax pressures
The CBI has slightly upgraded its Gross Domestic Product (GDP) forecasts to 1.4 per cent for this year and 1.3 per cent for 2026. However, they attribute this marginal improvement primarily to a short-term public sector spending increase, which is to be funded by tax rises taking effect from 2028. This masks a challenging underlying economic picture, with consumer spending being squeezed by stagnant living standards and business investment remaining subdued due to weak demand, high operational costs, and prevailing economic uncertainty both domestically and internationally.
Budget fails to spark sustained growth
The recent Budget has been criticised for imposing further tax burdens on households and businesses without providing the necessary stimulus for a sustained economic recovery. Louise Hellem, CBI chief economist, noted that the momentum seen in early 2025 has faded, with the Budget offering only a temporary boost from government spending. She stated that there is a lack of measures providing a lasting impetus for business investment and growth, which is concerning given the government’s stated priority on economic expansion.
Barriers to competitiveness remain unaddressed
While acknowledging the government’s longer-term reform ambitions in areas like planning and infrastructure, Hellem expressed a desire for more focus on growth within the Budget. She described it as a "Budget for stability rather than growth." Businesses are reportedly struggling with the impact of increased employer national insurance contributions, significant rises in the minimum wage, and escalating energy bills. The CBI chief economist highlighted that "too many bold choices [were] unaddressed" and urged the government to urgently tackle major barriers to competitiveness, including crippling energy costs, a complex and expensive business tax regime, and uncertainty surrounding future employment costs, if it is serious about restoring confidence and boosting the economy.
This assessment follows a similar warning from the British Chambers of Commerce, which also indicated that the UK is set to remain "stuck in low gear" following a Budget that failed to stimulate growth. Recent GDP figures for October are expected to show a modest monthly growth of just 0.1 per cent.
