A recent survey reveals that two-thirds of business executives are concerned that the government budget will impede their growth plans, prompting cuts in pay rises, halting recruitment, and reducing investments.

Conducted by the Institute of Directors, the survey of over 700 leaders indicated a further decline in business confidence, already at its lowest point since December 2022, following the chancellor’s recent address.

Roger Barker, policy director at the IoD, commented, “The government’s decision to implement substantial new tax obligations poses a significant risk to the economic recovery.””

During the budget announcement, the chancellor unveiled a £40 billion tax increase plan, primarily affecting businesses via an uptick in employers’ national insurance contributions.

The industry group UK Hospitality has projected that by 2025, the annual expense associated with hiring a full-time worker earning the national living wage will increase by £2,526.

Neville Prior, chairman of Cornelius Group—a specialty chemicals manufacturer with around 100 employees in Hertfordshire—remarked that additional staffing costs will undeniably impact their future plans.

He added, “This creates extra financial pressure on the business, resulting in reduced investment in growth initiatives. Consequently, during our salary reviews next year, we expect to offer approximately 1 percent less than we otherwise would, and we will refrain from hiring unless absolutely necessary.””

BDO’s tax partner, Paul Falvey, indicated that sectors such as retail, leisure, hospitality, and healthcare, which rely heavily on lower-paid employees, are particularly vulnerable. For some companies already facing financial challenges, this increase could be the tipping point.

Steve Rigby, co-CEO of the Rigby Group—a Stratford-upon-Avon-based IT services provider with 4,000 employees—predicted that businesses might have to accept lower profit margins, although many will likely raise prices to offset some financial strains.

He stated, “The increase in employee costs will regrettably lead to higher prices. Businesses, including ours, cannot absorb all these changes.””

Prior also expressed that Cornelius may need to raise prices more than initially planned. He acknowledged that if others follow suit, it could contribute to inflation, ultimately impacting consumers.

Bruce Cartwright, CEO of the Institute of Chartered Accountants of Scotland, noted that the budget’s repercussions—such as fewer hires, smaller pay increases, and reduced employee benefits—will directly affect workers’ wealth while hindering business expansion.

According to Chris Eldridge, CEO for the UK, Ireland, and North America at the recruitment firm Robert Walters, if wage growth slows next year, it might delay the anticipated return to in-office work, as companies lean towards less costly so-called “soft benefits” instead of significant pay raises.

He commented, “We had expected a stronger emphasis on returning to the office in 2025; however, we have observed several companies in both the UK and US adopting a more stringent approach to in-person work. As a result of these tax hikes, companies may be more lenient in offering flexibility to retain talent if substantial salary increases are off the table.””