Britain’s foremost business lobby group, the Confederation of British Industry (CBI), has issued a stark warning over the impact of Labour’s leadership struggle and rising business taxes on the UK economy. In its latest forecast, the CBI highlights plummeting private sector hiring, economic growth downgrades, and forecasts a rise in unemployment by 200,000 this year, painting a bleak picture of the nation’s financial future.
Growth Outlook Slashed
The CBI has slashed the UK’s growth forecast from 1.3% to 1.1% for 2025 and cut the 2027 forecast drastically from 1.5% to just 0.9%. They cite escalating global costs spurred by the Iran conflict, combined with domestic political instability as key factors behind the worsening outlook.
Rising Unemployment Threat
Unemployment is expected to climb to 5.5% this year as private sector employers freeze recruitment in response to rising employer National Insurance contributions and increased minimum wage costs. The CBI voiced concern over the growing gap between a flourishing public sector and a stalling private sector.
Tax Burden Crushing Business
CBI Chief Economist Louise Hellem criticised continual tax increases on businesses, stating: “You cannot build growth by continually increasing the tax burden on business, and you cannot solve the cost-of-living challenge without tackling the cost of doing business.” The hostile business environment is forcing many companies to reconsider expansion and hiring plans.
Labour Leadership Crisis Adds Uncertainty
Political uncertainty from Labour’s internal leadership battle — with contenders Andy Burnham and Wes Streeting vying to succeed Sir Keir Starmer — is undermining business confidence. Hellem stressed that this turmoil discouraged firms from committing to long-term investments precisely when economic stability is needed most.
Pressure Mounts On Government
The deteriorating economic forecast increases pressure on the government amid growing criticism over fiscal management and its strained relationship with businesses, underscoring the urgent need for stability and supportive economic policies.
