The Federation of Small Businesses (FSB) reported that confidence among its members has plummeted to the lowest level since the onset of the COVID-19 pandemic, particularly impacting those in the accommodation and food services sectors.

Recent tax increases imposed by the government have sparked significant concerns among British employers, leading many to warn of impending redundancies and a notable decline in small business confidence.

A survey conducted by the Chartered Institute of Personnel and Development (CIPD) revealed that the number of companies planning staff redundancies is at its highest level in a decade, excluding the pandemic.

Approximately 90% of employers believe that Finance Minister Rachel Reeves' payroll tax hike, set to take effect in April 2025, will increase their employment costs.

Surveys indicate that 42% of employers plan to raise prices, while 32% intend to reduce their workforce through layoffs or by hiring fewer new employees.

CIPD Chief Executive Peter Cheese noted that the current drop in employer sentiment is the most significant in a decade, second only to the pandemic period.

The FSB survey also revealed that about 25% of small businesses expect their business size to contract in the near future.

Critics, including the Liberal Democrats, have labeled Reeves's tax measures as detrimental to the economy, particularly for small businesses, warning of potential job losses as companies grapple with increased costs.

Despite a slight growth of 0.1% in the UK economy during the last quarter of 2024, the Bank of England has revised its growth forecast for 2025 down to 0.75%.

In defense of the Budget, a Treasury spokesperson claimed it aims to provide stability for businesses while protecting workers from higher taxes, asserting that many employers would see no change or a reduction in their national insurance bills.

Reeves has defended the tax increases as a necessary, one-off measure to stabilize public finances and fund essential services and investments.

The government plans to stimulate economic growth through measures such as capping corporation tax and making various tax cuts permanent for the retail and hospitality sectors.