Rachel Reeves has been warned that firms face a “make-or-break moment” at next month’s budget.
The British Chamber of Commerce (BCC) urged the chancellor, who is widely expected to announce tax hikes in November’s budget to fill a gap in the public finances, to steer clear of increasing levies on businesses.
Ms Reeves raised taxes by £40bn last year and the BCC said business confidence had not recovered since.
“Last year’s budget took the wind from their sails, and they have been struggling to find momentum ever since,” BCC director-general Shevaun Haviland said.
She said firms felt “drained” and could not plan ahead as they expected “further tax demands to be laid at their feet” when the budget is delivered on 26 November.
“The chancellor must seize this moment and use her budget to deliver a pro-growth agenda that can restore optimism and belief amongst business leaders,” Ms Haviland added.
“This year’s budget will be a make-or-break moment for many firms.”
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The BCC also called for a reform of business rates and the removal of the windfall tax on gas and oil introduced by the last government.
In its submission, the industry body outlined more than 60 recommendations, including the proposal of further infrastructure investment, cuts to customs barriers and action on skill shortages.
Earlier this year, Prime Minister Sir Keir Starmer announced Labour would aim to approve 150 major infrastructure projects by the next election, with Labour already pledging to support expansions of both Heathrow and Gatwick airports – another of the BCC’s requests.
While the Treasury would not comment on budget speculation, a spokesperson insisted Ms Reeves would “strike the right balance” between ensuring funding for public services and securing economic growth.
She has vowed to stick to Labour’s manifesto pledges not to raise taxes on “working people”.
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Household spending on the wane
The BCC’s plea to halt further tax rises on businesses comes as retail sales growth slowed in September.
“With the budget looming large, and households facing higher bills, retail spending rose more slowly than in recent months,” Helen Dickinson, chief executive of the British Retail Consortium (BRC), said.
“Rising inflation and a potentially taxing budget is weighing on the minds of many households planning their Christmas spending.”
Total retail sales in the UK increased by 2.3% year-on-year in September, against growth of 2% in September 2024 and above the 12-month average growth of 2.1%, according to BRC and KPMG data.
While food sales were up by 4.3% year-on-year, this was largely driven by inflation rather than volume growth.
Non-food sales growth slowed to 0.7% against the growth of 1.7% last September, making it below the 12-month average growth of 0.9%.
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Online non-food sales only increased by 1% against last September’s growth of 3.4%, which was below the 12-month average growth of 1.8%.
“The future of many large anchor stores and thousands of jobs remains in jeopardy while the Treasury keeps the risk of a new business rates surtax on the table,” Ms Dickinson said.
“By exempting these shops when the budget announcements are made, the chancellor can reduce the inflationary pressures hammering businesses and households alike.”
