Businesses yesterday warned the Chancellor that they cannot shoulder further tax hikes in the Budget after a sharp slowdown in economic growth.
Leading City groups said Rachel Reeves must rule out another tax raid after GDP growth of 0.3 per cent between April and June – a dramatic drop on the 0.7 per cent recorded in the previous three-month period.
The reading was stronger than the 0.1 per cent growth that economists had forecast, but the British Chambers of Commerce (BCC) cautioned: ‘The numbers mask the underlying pain being felt by businesses.’
Growth was boosted by Government spending but household expenditure slowed to 0.1 per cent and business investment fell 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.
‘There must be no more business taxes in the Budget,’ BCC research manager Stuart Morrison said.
Warned: Businesses yesterday warned the Chancellor that they cannot shoulder further tax hikes
CBI lead economist Ben Jones said that ‘the UK is walking a narrow path between resilience and stagnation’, adding: ‘Policy uncertainty in the run-up to the Budget risks tipping the balance.
‘With the business tax burden at a 25-year high, the Government must chart a steadier course by ruling out further tax rises and prioritising policies that can quickly lift investment and productivity.’
And the Institute of Directors (IoD) said it was ‘striking that momentum is coming from the public sector, with consumer spending slowing and business investment contracting’.
IoD chief economist Anna Leach said: ‘Private sector growth is being held back by both global and domestic policy uncertainty, with speculation over forthcoming tax increases adding to the headwinds.
‘We urge the Government to adopt a strategic approach to policy, prioritising removing blockers to growth, particularly in the planning system, and enhancing the efficiency of the tax system.’
The pound spiked after the GDP figure, rising to just below $1.36, a one-month high, before giving up ground later.
Against the euro, the pound rose above €1.16, also the highest in a month.
That was after the firmer-than-expected GDP figures from the Office for National Statistics added to fears that there will be no further Bank of England interest rate cuts this year – amid concerns about rising inflation.
Analysts at HSBC said: ‘The GDP data suggests the UK economy, while not booming, is still trundling along and creating jobs. This strategy has so far proved unsuccessful. The risk is the Bank chooses to pause or slow the pace of rate cuts.’
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