CBI boss says Labour has ‘bruised’ trust of businesses after Budget

The Chancellor has “bruised” business confidence by expecting companies to help fill the hole in public finances, the chairman of the Confederation of British Industry (CBI) has said.

Rupert Soames said business leaders are less likely to employ people in the current climate.

He was referring to Chancellor Rachel Reeves’ decision to raise national insurance contributions (NIC) for employers, among other business cost increases in the October Budget.

The NIC increase is designed to help fund improvements to public services like the NHS, but it has come under criticism from companies for making it more expensive to employ people.

Mr Soames told BBC Radio 4’s Today programme: “The Chancellor told us at the time of the Budget that there was an unexpected hole of about £22 billion in the Government finances, and business was going to have to fill it.

“In filling in one hole, it’s created another, and that hole is a hole in the confidence and trust that business has in the Government.

“I think sometimes it’s not understood, the extent of the impact, particularly on companies that employ lots of people.

“We think the national insurance increases are going to feed through into inflation, we’re going to have a lower growth rate, but also, because of things like the Employment Rights Bill coming along, you’re going to find people laying people off and less likely to employ.”

Mr Soames’ comments come after companies including Marks & Spencer and Tesco refused to rule out passing on increased costs to customers earlier in January, despite announcing bumper Christmas periods.

M&S chief executive Stuart Machin said the retailer will try to limit any cost increases, but suggested it will be more difficult to hire new staff.

Sainsbury’s, meanwhile, said it will raise staff wages by 5% after reporting its “biggest ever” Christmas.

Labour is also planning to bring in new rules to strengthen workers’ rights, expected to come into force in 2026.

The Employment Rights Bill will bring in guaranteed hours provisions on zero-hours contracts and allow workers to bring unfair dismissal claims from the first day of employment.

However, it will also introduce a new statutory probation period designed to make it easier for employers to dismiss new hires if they are found to be unsuitable for the job.

Speaking about the impact of the Bill on businesses, Mr Soames said: “I think not only will they not employ, I think they will let people go.

“I think there could be quite an ugly rush before some of these things come into force.

“Nobody wants this, but the things like the probation periods in the Employment Rights Bill, we don’t want that to become an adventure playground for employment rights lawyers.”

His comments came amid an intensifying sell-off in government bonds as Chancellor Rachel Reeves faces mounting questions over her fiscal rules.

The rate that the Government can borrow money at – known as the yield – rose again on Monday, after it spiralled earlier in January.

Borrowing costs are rising for many countries across the globe this month, though some economists have said Ms Reeves’ Budget measures have made the UK more vulnerable.

The Chancellor is facing concerns the Government might fail to meet its own fiscal rules and will need to take action to remain on track.

Ms Reeves insisted over the weekend that her fiscal rules are “non-negotiable”.