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Highlights
- The Confederation of British Industry (CBI) downgrades 2024 UK growth forecast to 0.9% following the Autumn Budget.
- Business costs and profit margins pressured by £40 billion in tax increases, dampening investment and hiring plans.
- Inflation expected to average 2.6% in 2025, driven by hospitality and retail price growth.
The Confederation of British Industry (CBI), the largest business group in the UK, has revised its economic growth forecasts downward following the Autumn Budget unveiled in October. Chancellor Rachel Reeves’ announcement of £40 billion in tax increases has raised concerns among businesses, with potential impacts on investment, hiring, and overall economic momentum.
Revised Growth Projections
The CBI now predicts economic growth of 0.9% for 2024, down from its previous estimate of 1.0%. Projections for 2025 have also been reduced, with the growth forecast trimmed from 1.9% to 1.6%.
Louise Hellem, the CBI’s chief economist, highlighted the challenges these measures present:
“Measures in the Autumn Budget will increase firms’ costs at a time when their profit margins have already been under pressure. Many businesses have told us that these measures will likely push up prices and weigh on their hiring and investment plans going forward.”
Inflationary Pressures
Inflation is expected to remain a concern, with forecasts averaging 2.6% in 2025 and 2.5% in 2026. Key contributors to inflationary pressure include price growth in the hospitality and retail sectors, which are anticipated to affect both consumers and businesses.
Business Sentiment
The sentiment among business leaders reflects unease with the Budget’s approach. AJ Bell chief executive Michael Summersgill criticized the Budget for its lack of focus on growth and investment, describing some of its proposals as “clumsy.”
“The narrative ahead of this Budget was out of line with the Budget that was ultimately delivered,” Summersgill said. “I didn’t see anything in the October Budget that was pro-growth and pro-investment, and that concerns me.”
Summersgill also raised the possibility of further tax increases during the current Parliament, adding to the uncertainty facing UK businesses.
Impacts on Business Plans
The Budget’s measures are expected to have ripple effects across sectors, with many firms reconsidering their plans for expansion, hiring, and investment. Rising costs and squeezed profit margins could lead to slower economic recovery, particularly as businesses grapple with inflation and evolving tax policies.
Looking Ahead
As the UK navigates a challenging economic environment, the CBI and other industry leaders are calling for a more balanced approach that supports growth while addressing fiscal concerns. The coming months will be critical in determining how businesses adapt to these challenges and whether additional policy measures can help foster a more favorable economic climate.
The Autumn Budget has set the stage for important debates on the UK’s economic priorities, with growth, investment, and inflation management at the forefront of discussions.
