Rachel Reeves's Budget choices having a 'damaging' impact on business investment, warns CBI boss

Controversial measures contained in Rachel Reeves’s first Budget are having a “damaging” impact on business investment, the head of the CBI has said.

Rain Newton-Smith, chief executive of the Confederation of British Industry (CBI), was in Yorkshire this week on a two-day trip to meet with businesses represented by her organisation.

Speaking to The Yorkshire Post in Sheffield in advance of a CBI business dinner at the Crucible theatre, said a recent survey of members done by the trade body found six in ten said the measures in the Budget made it less attractive to invest in the UK.

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That follows the Office for Budget Responsibility forecasting that the measures in the Budget will result in lower business investment in the next few years.

Rain Newton-Smith pictured at The Crucible Theatre in SheffieldRain Newton-Smith pictured at The Crucible Theatre in Sheffield
Rain Newton-Smith pictured at The Crucible Theatre in Sheffield

Earlier this week, more than 70 retail businesses including Tesco, Asda and Sainsbury’s wrote to the Chancellor to warn her that the combined raft of packages announced in the budget including national insurance rises, packaging levies and increases to the national minimum wage could cost the industry more than £7 billion each year.

There has been particular concern about an increase in National Insurance for employers, which will see the threshold on which payments start on workers’ salaries cut from £9,100 per year to £5,000 from April 2025.

Ms Newton-Smith said: "It definitely feels the Budget is taking the slow road to growth. Now that businesses are really sitting down and going through some of the numbers and when they look at the increase in National Insurance contributions, that really does hit business’s bottom line.

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"So when they are thinking about their plans for next year they are realising there is less room for investment if they had that sort of headroom to invest. It is harder for them to take a risk on hiring and creating opportunities.

Rain Newton-Smith was in Yorkshire this week and visited the Crucible Theatre in Sheffield for a business dinner.Rain Newton-Smith was in Yorkshire this week and visited the Crucible Theatre in Sheffield for a business dinner.
Rain Newton-Smith was in Yorkshire this week and visited the Crucible Theatre in Sheffield for a business dinner.

"It definitely feels like a tough Budget for business when they are looking at their plans for the next few years. I do think there were things that were really welcome for the long-term in the Budget, like the extra space for capital spending on infrastructure and energy transition.

"But there is no doubt that the cumulative burden from the rise in National Insurance alongside the increases in National Living Wage is really challenging. We are a people-based economy and businesses I speak to want to be able to deliver a top-notch service to their customers. But they are running the numbers on what that means for their bottom line and it does feel really tough.”

She added: "We can point lots of areas where we have had a really constructive conversation with Government.

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"We are seeing the biggest change in employment rights for a generation and government have really brought us into the room alongside unions to really say how do we bring in some of those changes in a way that helps make it easy for businesses to still provide jobs and growth and opportunities.

"We know the Chancellor some tough choices but I think almost just bringing business alongside with them and understanding the impact of some of those different choices, I think we could have ended up with a better way of achieving some of that support for public services but in a way that maybe had less of a damaging impact on investment in the short-term.”

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When asked whether the Chancellor should reconsider what was announced in the Budget, Ms Newton-Smith replied: "Business is behind that broader stability of only having one fiscal event a year. So I think our role is to be really clear with government about the impact it is having on investment decisions and hold the Government to account.

"If growth is their mission and they’ve said investment is the solution, we are going to have to really work hard to help businesses make the investments we need over the next three to five years.

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"We need to double down on some of the reforms on business rates that will help take some of the rising costs out of business, particularly those on our High Streets.

"More broadly we’ve got to double down on the Industrial Strategy and make sure that is a long-term strategy to deliver growth and investment.”

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