Businesses give up on growth as Labour leaves them battling to survive
Businesses are battling to survive rather than grow as red tape and other costs imposed by Labour hold them back, the Confederation of British Industry (CBI) has warned.
In a new report, the CBI reveals that firms remain gloomy about the outlook over the coming months and calls for those burdens to be cut to help the economy.
The sentiment is echoed in a separate survey from the Institute of Directors (IoD) showing that bosses are reluctant to expand amid the costs being piled onto them by the government.
CBI deputy chief economist Alpesh Paleja said: ‘Businesses want to grow, but many are being forced to focus on resilience rather than expansion.
‘Firms need an easier and cheaper environment in which to operate. That means further measures to cut business energy costs, action to ease high labour costs, and a serious push to reduce the regulatory burden that is weighing on investment, employment and growth.’
It adds to the chorus of complaints from firms that national insurance and minimum wage hikes, together with a package of new workers’ rights rules and botched business rates reforms are holding the private sector back.
They are also facing ‘another layer of pressure’ as the Iran war raises the threat of cost increases and supply chain disruption, Mr Paleja said.
Business is facing rising costs and more red tape under Keir Starmer and Rachel Reeves
A poll of 659 firms by the CBI revealed that firms across the economy expect activity to fall in the three months to August – extending a prolonged period of negative sentiment extending back to late 2024 shortly after Labour came to power.
And it revealed that the past three months have already seen activity fall back.
Mr Paleja said businesses were ‘still feeling the chill as they head into summer’ amid weak household demand and firms’ ‘reluctance to commit to big expenditure’.
The IoD’s separate survey showed overall economic confidence remained negative last month (May) though it has edged up from lows seen earlier this year. Investment and hiring expectations remain in the doldrums.
IoD chief economist Anna Leach said: ‘Cost expectations remained elevated and firms continued to be reluctant to expand, amidst widespread frustration with tax and regulatory burdens, particularly employment.’
The poll of 615 firms found that the state of the UK economy was the biggest factor having a negative impact on businesses while the biggest global concern was the risk of a worldwide slowdown.
Ms Leach said that ‘amidst what feels like an eerie calm in broader business conditions’, firms were likely to face rising costs and financial conditions as overall conditions ‘become more challenging’.
‘To support businesses in driving the resilient growth needed, urgent action is needed to tackle the rising cost of doing business in the UK, through bringing down energy and regulatory costs, and reforming business rates,’ she said.
It comes days after stark official figures showed redundancy plans by employers have surged to the highest level since the pandemic, underlining Britain’s economic malaise under Labour.
The Office for National Statistics (ONS) said firms were giving notices of planned lay-offs at a rate of 8,900 a week, 76 per cent up on the same period last year.
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