Many businesses have paused hiring and delayed investment decisions in anticipation of potential tax increases in the looming Budget, according to a leading business group. The Confederation of British Industry (CBI) has found that firms are waiting for clarity on the new government’s economic policies before making major decisions.

Economic Growth Rebounds in August, but Outlook Remains Uncertain

While the UK economy showed signs of recovery in August, growing by 0.2%, concerns remain about the overall economic outlook.

The Office for National Statistics (ONS) pointed out that despite the recent improvement, the broader trend indicates slower growth compared to earlier in the year. This growth was driven by construction, manufacturing, retail, and accounting sectors. However, economists warn that businesses still need a clear direction from the government on future economic plans.

Tax and Spending Policies Under Scrutiny Ahead of the Budget

The government is set to outline its tax and spending policies on 30th October, with speculation mounting over potential tax increases.

Prime Minister Sir Keir Starmer has warned that the Budget may include ‘painful’ measures, as the government grapples with high debt, rising interest rates, and inflation concerns.

While ministers have ruled out increases in VAT, National Insurance, and income tax for individuals, other tax options remain on the table. A rise in capital gains tax and potential reductions in pension tax relief are among the measures under discussion, with an increase on Employers National Insurance contributions being the latest rumour. The government’s ability to balance these decisions will be key to attracting investment and driving the future economic growth they’ve said they want to encourage.

Government to Focus on Long-Term Growth Strategies

Chancellor Rachel Reeves has signaled that the government will prioritize growing the economy to fund essential services like the NHS and improve living standards.

To support this, Reeves plans to relax borrowing rules to fund large-scale infrastructure projects, although further tax increases remain likely. Anna Leach, chief economist at the Institute of Directors, urged the government to use the Budget and investment summit to shift the focus from debt management to building a stronger future economy. This approach, she argued, would lead to more sustainable public finances and improved living standards over time.

Our view…

We’ve mentioned elsewhere that we’ll be keeping a close eye on developments, but until the announcements are made, nothing is certain. In our view, delaying major decisions for a couple of weeks could be the most sensible option, despite the impact that will have in the interim.

Once we know what exactly has been announced, we’ll send clients our summary, and be very happy to have conversations around the specific impact on their circumstances. Then perhaps we can all look forward with some certainty!