Reeves’ tax rises blamed as CBI cuts growth outlook – Daily Business

Rachel Reeves’ tax rises will weaken the economy over this year and next, by hitting companies’ hiring and investment intentions, according to a damning new report.

The CBI has downgraded its forecast for growth this year to 1.2% from 1.6% in December, saying the economy began the year on a strong note but has been battered by soaring costs imposed by the Chancellor. It expects growth in 2026 to fall to 1%.

“Higher employment costs following the Autumn Budget are feeding into decisions around pricing, capital expenditures, and hiring,” says the CBI, adding that higher US tariffs are set to create headwinds for exports and investment.

It expects activity to gradually strengthen on a quarterly basis over 2026, as household spending is supported by real incomes growth, lower interest rates, and easing inflation.

“However, elevated labour costs and global economic uncertainty will weigh on business investment,” it says. 

Louise Hellem, chief economist at the CBI, said:  “Our latest Economic Forecast underlines the challenges facing businesses and the wider economy as they’re buffeted by domestic and global headwinds.

“The unpredictable global outlook combined with rising employment costs, gloomy business sentiment, and subdued investment intentions means it’s more important than ever that government pulls all the levers it can to set the UK on a path to sustainable growth.

“With GDP set to remain modest in 2026, there is an important opportunity for the government to fire up the growth agenda in the forthcoming Industrial Strategy.

“With the cumulative burden of increased costs being felt by firms across the economy, it is vital the Industrial Strategy helps drive a thriving environment for all businesses.”