British businesses say budget stifling growth

Businesses in the United Kingdom expect a bumpy ride in the coming months because of the new government's first annual budget.

The financial plan, which was set out by the country's finance minister, Chancellor of the Exchequer Rachel Reeves, at the end of October will have a significant negative impact on enterprises, Britain's biggest business lobby group, the Confederation of British Industry, said on Monday.

After surveying its 190,000 member-businesses, the organization, which is also known as the CBI, said tax rises contained in the budget mean companies now expect to scale back expansion plans, reduce workforces, and abandon recruitment drives.

The CBI's survey, which was completed by 266 enterprises, found almost half are expecting to delay or temporarily reduce pay rises. Some 62 percent are planning to hire fewer people, and around six businesses in 10 believe the budget will not make the UK more attractive for investment.

Rain Newton-Smith, the CBI's director-general, said before the budget, companies had not been expecting tax hikes, especially the increase in the national insurance which enterprises pay the government to help fund workers' health and social security needs.

"Tax rises like this must never again simply be done to business," she said at the CBI's annual conference. "Even where the risk isn't critical, firms that have been through really tough years are now in damage control again."

She said the tax hikes "caught us all off guard" and will "put a heavy burden on business".

Her comments were the latest in a series of scathing assessments of the new government's first budget.

Employers have also been highly critical of the new Labour Party government's decision to raise the country's minimum wage, and its plans to protect workers' rights with new legislation.

Reeves has said she had no choice other than to raise taxes, after the government found a 22-billion-pound ($27.7-billion) "black hole" in the country's finances after it came to power following the general election on July 4.

Reeves' budget increased taxes by more than 40 billion pounds, with most of that money coming from the increase in the amount of national insurance companies must pay.

Newton-Smith said the budget will significantly dent a lot of UK businesses' profitability, which is bad news for everyone.

"Profits aren't just extra money for companies to stuff in a pillowcase," she said. "Your future profitability shapes your ability to invest and grow sustainably. Your future profitability is your reason to invest … When you hit profits, you hit competitiveness, you hit investment."

Newton-Smith called on the government to borrow more money to pay for services, instead of forcing companies to contribute more. She also called for cuts in red tape, to ensure companies enjoy the benefits of speedier planning decisions, simplified tax rules, and quicker adoption of technology.

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