Higher business taxes take toll on UK economy as companies cut back hiring

In the Unlock the Editor’s Digest, Roula Khalaf, Editor of the FT, highlights Rachel Reeves’ increase in business taxes impacting the UK economy as companies reduce hiring, leading to a drop in private sector employment in December. The S&P Global flash UK purchasing managers’ employment index fell to 45.8, reflecting a lack of stable headcount due to corporate confidence being affected by Reeves’ £25bn rise in employers’ national insurance contributions. Business groups express concerns about growth, increased costs, and potential layoffs, with the Bank of England expected to hold interest rates steady despite economic weaknesses. The BoE survey indicates a projected decline in employment, and manufacturers’ confidence in the economy has decreased sharply. Businesses are facing challenges managing higher national insurance contributions, with some considering job cuts and reduced investment. The PMI figures suggest a stagflationary impact from the tax hike, with companies hiring fewer workers and increasing prices. The MPC is anticipated to keep interest rates unchanged at 4.75 per cent, as inflation remains a concern. The Treasury emphasizes its commitment to supporting businesses by capping corporation tax, offering full permanent expensing, and collaborating to foster growth opportunities.

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