Companies slow down investments before budget

British companies are putting investment and hiring plans on hold ahead of next month’s highly anticipated Budget amid fears the Chancellor will put pressure on business to close the UK’s budget deficit for the second time in as many years.

More than four in five (84 per cent) bosses are worried about the prospect of further tax rises that could have a negative impact on their bottom line, even after the private sector absorbed the bulk of last year’s historic £40bn tax raid, according to a new survey of small and medium-sized businesses.

And in a further sign of executives’ nervousness, three quarters of respondents admitted they would delay key hiring and investment decisions until after the Chancellor’s announcement on November 26.

“These figures are a flashing red light on Britain’s economic dashboard,” said Andreas Adamides, head of business group Helm, which commissioned the study. “When more than 80 percent of business leaders are bracing for tax increases and three-quarters have paused on investment, it is clear that the growth engine is idling when it should be accelerating.

“The Chancellor must remember that trust is the oxygen of entrepreneurship – without trust, ambition suffocates.”

A delayed budget will lead to a slowdown in investment in the Golden Quarter

The findings will bring renewed scrutiny to the Chancellor’s decision to pass the most important budget event of the year at the end of November, weeks after the usual budget deadline of late October or early November.

The later timing could provide Rachel Reeves with a fiscal windfall thanks to lower-than-expected inflation, meaning the government now has significantly lower borrowing costs than it did a month ago.

But industry leaders and economists have warned it will also impact companies’ “golden quarter,” the all-important three months between October and December when retailers and other businesses often enjoy their best trading period.

Panmure Liberum chief economist Simon French said last month that the late Budget date could weigh on the British economy as speculation over tax rises causes bosses and consumers to hold back on spending plans.

Helm’s Adamides added: “The Autumn Budget must fuel Britain’s growth ambitions. That means no new taxes on businesses, real incentives for investment and a clear signal that Britain is open to growth. Give businesses the green light to drive our economy forward.”