Global finance experts have delivered a damning verdict on the state of the UK economy and blamed Chancellor Rachel Reeves.
S&P Global said: “Concerns about squeezed margins, weak customer demand and lacklustre UK economic growth prospects were all cited as weighing on business confidence in January.”
In a new report looking at the state of the UK economy, the New York-based finance firm said businesses did less work in January than previous months “and the pace of job shedding accelerated to its sharpest for four years.”
It said the state of the global economy was a factor, but much of the blame lay with last year’s Budget which increased National Insurance for employers, pushing up the cost of employing people.
The report warned: “While some service providers commented on the impact of global economic uncertainty and elevated interest rates, many firms also linked lower new orders to weaker business confidence in the wake of the Autumn Budget.”
S&P Economics Director Tim Moore said: “A range of growth headwinds at home and abroad were cited by survey respondents, including elevated interest rates, geopolitical uncertainty and a post-Budget slide in domestic business confidence.”
The findings will add to concern that Chancellor Rachel Reeves will be forced to announce huge spending cuts, or to break her promise not to increase taxes even more.
Shadow Business Secretary Andrew Griffith said: “These figures show Labour’s job killing budget and the £5 billion of additional red tape on employment are having precisely the impact businesses warned about.
“It’s devastating that employers have cut employment for five months in a row.
“The Chancellor is out of her depth with working people paying the price.”
Rachel Reeves has been warned that she will have no choice but to cut spending or increase taxes because any leeway in the public finances has “evaporated”.
Official Treasury watchdog the Office for Budget Responsibility (OBR) has warned Ms Reeves that the government’s £9.9 billion in “fiscal headroom”, spare money that could be used to fill any gaps in her spending plans, has been wiped out by low growth, higher borrowing costs and higher-than-expected interest rates, according to reports.
The OBR will publish its official verdict on the state of the public finances on March 26. Ms Reeves will publish a spending review with multi-year plans for Government departments on June 11.
Earlier this week the EY Item Club economic forecaster became the latest influential group to cut its predictions amid continued pressure on businesses, which face further tax and wage rises in April.
It represents another blow to Chancellor Rachel Reeves’ hopes to rapidly grow the UK economy in order to help support the Labour Government’s spending plans.
UK gross domestic product (GDP) is expected to grow by 1% in 2025, according to EY’s winter forecasts.
It had previously predicted 1.5% growth for the year.
