Business sector expected to contract due to CBI's warning towards Reeves regarding additional tax seizures

In the economic landscape of 2025, businesses are facing a series of challenges that threaten to slow down growth across various sectors. According to recent forecasts, the consumer services sector is expected to experience the steepest decline. Retailers, wholesalers, business and professional services, and manufacturing companies also anticipate significant slowdowns.

Amidst these concerns, a recent Lloyds Bank survey reveals a surprising spike in business confidence, with levels not seen in over a decade, as per the Treasury spokesperson. However, this optimism is tempered by ongoing tax rumours, which have been causing unease in boardrooms, according to IoD chief economist Anna Leach.

The government has taken steps to support businesses, having struck major trade deals with the EU, US, and India. Additionally, business rates are being reformed, and corporation tax is capped at 25%, as mentioned by the Treasury spokesperson. Yet, these measures may not be enough to ease the concerns of businesses.

Firms are citing a variety of issues as their primary concerns. These include the 3.8% inflation rate seen in July, higher National Insurance contributions, an increase in the minimum wage, regulatory pressures such as Angela Rayner's Employment Rights Bill, and the potential for these factors to increase costs and reduce flexibility.

In response to these challenges, bosses are anticipating cutting back on hiring and investment across all major sectors. IoD's Leach stated that leaders plan to restrict pay rises, cut headcount, and reduce investment. The Confederation of British Industry (CBI) expects private sector contraction over the coming quarter.

The CBI urges the Treasury to focus on "smarter deregulation" and cost reductions to boost growth. It has been a full year since the CBI last recorded a positive reading for future expectations. The Institute of Directors (IoD) reported a bleak picture in its latest confidence tracker, comparable to levels seen during the first Covid lockdown and the fallout from Liz Truss's mini-Budget.

Leach added that higher costs and rising regulatory risks threaten to undermine ambitions for jobs and growth. She emphasised the need for the Government to present a more coherent and consistent economic plan, focused on easing the cost of doing business.

Chancellor Rachel Reeves is expected to introduce tax changes in the Autumn Budget 2025 aimed at reducing the burden on businesses while needing to raise £50 billion to support the economy. Specific government measures to ease business costs have not been detailed yet, but her budget presentation is scheduled for November 26, 2025.

Economists expect new measures to close the gap, but the rumours of further tax increases are causing unease. Alpesh Paleja, CBI economist, urges the autumn Budget not to add to the strain with further tax rises that could undermine investment and growth.

As the economic landscape continues to evolve, businesses and policymakers will need to navigate these challenges to ensure sustainable growth and job creation. The Chancellor will need to balance the need for tax revenue with the need to support businesses and ease the cost of doing business. The coming Autumn Budget will be a crucial moment in determining the direction of the UK's economic future.

Business sector expected to contract due to CBI's warning towards Reeves regarding additional tax seizures