Rachel Reeves’ budget has continued to backfire, after new data revealed a big surge in the number of businesses closing down following her massive tax rises.
According to notices filed, there has been a 64% rise in companies filing for insolvency in the week ending November 8, compared to the same period in 2023.
Over 1,000 companies closed down, causing a further headache for Ms Reeves who continues to insist her National Insurance hike won’t affect working people.
Bloomberg, who first spotted the startling data, report that some owners of solvent companies had already begun winding up ahead of the budget, when national insurance rise rumours were already doing the rounds.
The first Labour Chancellor for 14 years announced a big increase to the taxes firms will pay to employ people, as well as hiking capital gains tax.
While Labour argues that the tax is on businesses, and therefore compliant with their election pledges not to increase taxes on working people, Paul Johnson of the IFS has since poured cold water on this claim.
Mr Johnson said: “It seems to me that would be a straightforward breach of a manifesto commitment. I went back and read the manifesto and it says very clearly ‘We will not raise rates of national insurance.’ It doesn’t specify employee national insurance.”
Responding to the news of firms closing down, the Tories’ shadow business secretary Andrew Griffith blamed the lack of business experience among the Labour cabinet.
Mr Griffith told the Express: “News that 1,000 companies a week are closing shows the impact of Labour’s disastrous approach to the economy.”
“After ‘trash talking’ confidence down all summer, the autumn Budget dealt another blow to business with the reality of tax rises and lower growth.
“No one in Labour’s Cabinet has business experience – unless you count standing outside of one on a picket line.”
Bloomberg also predicts that new data this week will likely show that the UK economy slowed down in the third quarter of this year, with a reduction in consumer spending.
This weekend, more than 200 hospitality bosses wrote to Ms Reeves warning that her sharp hike in NICs are “unsustainable” and will result in business closures and job cuts within the year.
The increase in NICs from 13.8% to 15%, as well as a threshold cut from £9,100 to £5,000, is estimated to cost the sector around £3.4 billion annually.
Wetherspoon chief Tim Martin was among the signatories, as well as Wagamamas, Young’s and the owner of Premier Inn.
A Treasury spokesman said: “With our public services crumbling… [and a] fiscal black hole from the previous government, we had to make difficult choices to fix the foundations of the country and restore desperately needed economic stability to allow businesses to thrive.”
On Sunday, Chief Secretary to the Treasury was asked whether businesses will simply have to “suck it up”, replying: “There are measures more broadly in the Budget, which we think are good for business, and good for growth, and good for the economy.”
“But on tax contributions, yes, it’s been designed in that way.”
