Business leaders have accused Chancellor Rachel Reeves of pushing up prices and discouraging employers from creating new jobs. The Confederation of British Industry issued a damning verdict in its latest economic forecast. It said the Chancellor’s decision to push up National Insurance paid by firms and to increase the minimum wage “will result in higher prices, slower pay growth, softer private sector employment, and weaker investment.”
And the blow came as US President Donald Trump’s tariffs piled pressure on businesses by causing a slowdown in global trade. Louise Hellem, Chief Economist, CBI, said: “Our latest Economic Forecast underlines the challenges facing businesses and the wider economy as they’re buffeted by domestic and global headwinds.
“The unpredictable global outlook combined with rising employment costs, gloomy business sentiment, and subdued investment intentions means it’s more important than ever that government pulls all the levers it can to set the UK on a path to sustainable growth.
“The Spending Review signalled a down payment on hardwiring the growth mission into government priorities, with targeted investment that will raise the long-term ceiling of the economy. But we know that the innovation, investment, and jobs necessary for growth will come from business, not Whitehall, and that government must work with business to create the right conditions to help shift the economy out of low gear.
“With GDP set to remain modest in 2026, there is an important opportunity for the government to fire up the growth agenda in the forthcoming Industrial Strategy. With the cumulative burden of increased costs being felt by firms across the economy, it is vital the Industrial Strategy helps drive a thriving environment for all businesses.”
The CBI said the economy began 2025 strongly but growth would be slower than expected “due to measures in the 2024 Autumn Budget and global trade uncertainty”.
It follows warnings from think tank the Institute for Fiscal Studies that the Chancellor could be forced to increase taxes in her budget later this year.
Conservative Mel Stride, Shadow Chancellor of the Exchequer, said: “The CBI’s warning is clear – higher employment costs linked to Labour’s Jobs Tax are killing growth.
“This follows the IFS’s warning that any reduction in growth forecasts ‘will almost certainly spark more tax rises’.
“The ‘Spend Today, Tax Tomorrow’ Chancellor, Rachel Reeves told the CBI that she is ‘not coming back with more borrowing or more taxes’ – but she has boxed herself into a corner and we know she now has a ‘secret plan to raise taxes’. Make no mistake – more taxes are coming.”