Business groups have issued urgent warnings to Chancellor Rachel Reeves against imposing further tax increases in the autumn Budget. The calls come as economic growth showed signs of slowing, raising concerns about the impact of additional tax burdens on companies already facing significant pressures.
GDP growth fell to 0.3 per cent between April and June, down sharply from 0.7 per cent in the previous quarter. While the figure exceeded economists' forecasts of 0.1 per cent, the British Chambers of Commerce cautioned that "the numbers mask the underlying pain being felt by businesses."
Growth was primarily driven by government spending, while household expenditure slowed to just 0.1 per cent and business investment plummeted by 4 per cent following the Chancellor's National Insurance hike. Reeves is expected to raise taxes in the autumn Budget to fill a £50billion hole in public finances.
Business leaders demand tax freeze
"There must be no more business taxes in the Budget," said Stuart Morrison, research manager at the British Chambers of Commerce. Business groups warn that companies are operating under what they describe as a 25-year high tax burden.
CBI lead economist Ben Jones said the "UK is walking a narrow path between resilience and stagnation," adding that "policy uncertainty in the run-up to the Budget risks tipping the balance." He urged the government to chart "a steadier course by ruling out further tax rises and prioritising policies that can quickly lift investment and productivity."
The Institute of Directors highlighted that momentum is coming from the public sector while "consumer spending slowing and business investment contracting." Chief economist Anna Leach said private sector growth faces headwinds from "speculation over forthcoming tax increases adding to the headwinds."
Currency markets respond positively
The pound spiked after the GDP figures, rising to just below $1.36 against the dollar, a one-month high, before giving up ground later. Against the euro, the pound rose above €1.16, also the highest in a month.
The stronger-than-expected data raised concerns about potential delays to Bank of England interest rate cuts amid inflation worries. Analysts at HSBC said: "The GDP data suggests the UK economy, while not booming, is still trundling along and creating jobs. The risk is the Bank chooses to pause or slow the pace of rate cuts."
The Chancellor's position is complicated by Labour's manifesto promise not to raise taxes on "working people," according to The i, limiting options while fiscal pressures mount for significant revenue increases.
Sources used: "Daily Mail", "The i"
Note: This article has been edited with the help of Artificial Intelligence.
