Fears that Rachel Reeves will land businesses with further tax increases in the November budget have driven confidence in the UK economy to the lowest level in almost a decade.
An index of economic sentiment among business leaders produced by the Institute of Directors, a lobby group, fell to -74 in September from -61 in the previous month, the lowest reading since the survey began in 2016.
The drop was fuelled by widespread anxieties about the higher cost of employing staff after the £25 billion rise in employers’ national insurance contributions announced in the chancellor’s maiden budget, which took effect in the spring.
Reeves may have to raise taxes by up to £40 billion on November 26 to offset an erosion in her fiscal headroom caused by a rise in government borrowing costs and an expected downgrade to medium-term economic growth.
The chancellor increased taxes by the same degree last October, the bulk of which was shouldered by private companies via the higher national insurance payments. Firms have responded by laying off staff, freezing recruitment and raising prices.
