Growth expectations among UK firms have taken a “decisive turn for the worst” and swung negative for the first time this year following the government’s tax-raiding Budget in October, a new survey shows.
The Confederation for British Industry’s (CBI) growth indicator showed that more firms expected activity to fall in the three months to February than to increase.
Firms in the retail and services sector expect sales volumes to fall in the coming three months, although manufacturing businesses anticipate a slight increase in activity.
The poor growth outlook comes after business leaders reported that activity fell at a faster pace in November than the previous three months.
Alpesh Paleja, interim deputy chief economist at the CBI, said growth expectations had “taken a decisive turn for the worse” since October’s Budget.
“Our surveys suggest that anticipated activity was already weakening heading into the October Budget and the Chancellor’s announcements have left businesses with even more tough choices to make,” he said.
The survey showed that hiring intentions were at their weakest level since January 2021, largely due to the extra employment costs imposed by the Budget.
The Chancellor pushed up the rate of employers’ national insurance to 15 per cent and also increased the minimum wage by 6.7 per cent.
“CBI members across the economy have told a consistent story that the rise in employer NICs will further dampen hiring, push up prices and/or squeeze investment budgets,” the survey noted.
Recent research from Deutsche Bank suggests that the tax hike could end up costing around 100,000 jobs.
The CBI’s survey is only the latest to show that the Budget has had a big impact on business sentiment.
The Institute of Directors’ (IoD) latest survey showed that sentiment slumped to its lowest ever level in November, excluding the onset of the pandemic in April 2020.
“Far from fixing the foundations, the Budget has undermined them, damaging the private sector’s ability to invest in their businesses and their workforces,” said Anna Leach, chief economist at the IoD.