The UK government is facing mounting pressure to reconsider its economic strategy following a damning report from the Confederation of British Industry (CBI). The report reveals that businesses are bracing for further declines in activity, with many planning to cut staff and raise prices in the coming months.
The CBI’s findings come as Chancellor Rachel Reeves prepares to announce major reforms, including plans to accelerate infrastructure development and support airport expansion. However, critics argue that her autumn Budget has failed to address the challenges facing businesses and consumers.
According to the CBI’s survey, private sector activity has stagnated or declined since mid-2022. The report highlights a grim outlook for the next quarter, with firms citing rising national insurance contributions and other tax hikes as key factors driving budget cuts and reduced investment.
The chancellor’s autumn Budget, which aimed to stabilize the economy, has instead sparked widespread criticism. Liberal Democrat Treasury spokesperson Daisy Cooper urged Reeves to “heed these warnings and do a handbrake turn” on policies that she claims have exacerbated the cost-of-living crisis.
“After years of Conservative economic vandalism, millions have been hammered by a cost-of-living crisis, but the Labour chancellor must accept that her Budget has not worked in turning that around.”
Daisy Cooper
Amid the backlash, Reeves is set to unveil a series of reforms aimed at boosting economic growth. In a speech later this week, she is expected to champion infrastructure projects, including a proposed third runway at Heathrow Airport and expansions at Gatwick and Luton.
Reeves defended her approach, emphasizing the potential benefits of modernizing the aviation sector. “There’s huge investment going on in electric planes, and also a third runway will mean that instead of circling London, flights can land at Heathrow,” she said.
However, some industry leaders remain unconvinced. Alpesh Paleja, interim deputy chief economist at the CBI, warned that businesses are struggling with weak demand and cautious consumer spending. “After a grim lead-up to Christmas, the new year hasn’t brought any sense of renewal, with businesses still expecting a significant fall in activity,” he said.
Mixed Reactions to Economic Strategy
While the government insists its policies will deliver long-term stability, recent developments have cast doubt on these claims.
Sainsbury’s announced plans to cut 3,000 jobs, citing the impact of Reeves’s Budget, while the farming industry has raised concerns over upcoming changes to inheritance tax rules.
Conservative MP Harriett Baldwin criticized the chancellor’s approach, stating, “This is another shockingly bad outlook from the private sector which the UK economy relies on to give us growth.”
Despite the criticism, some Labour MPs defended the Budget, arguing that the government inherited a dire economic situation. “The decisions we’ve taken to fix this country, such as investing to rebuild our crumbling infrastructure, take time to fully be felt,” said Treasury committee member Jeevun Sandher.
The International Monetary Fund (IMF) recently forecast that the UK economy will grow by 1.6% in 2025, following a weaker-than-expected performance in 2024. While the government has highlighted positive trends, such as increased business investment, rising borrowing costs and persistent concerns from business leaders continue to undermine confidence.
As pressure mounts on Reeves to rethink her policies, the CBI’s report serves as a reminder of the challenges ahead. With businesses warning of further cuts and price hikes, the government faces an uphill battle to restore economic momentum and address the concerns of the private sector.
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