The UK economy is “headed for the worst of all worlds” as businesses expect activity to fall at the start of next year, according to the Confederation of British Industry (CBI).
The industry group’s growth indicator survey found that private sector firms expect to cut down on hiring, reduce output and for prices to rise in the first three months of 2025.
One of the main reasons given by businesses for the poor outlook was Chancellor Rachel Reeves‘ decision to raise employers’ national insurance contributions (NIC) – which is expected to raise around £25bn a year.
While the chancellor accepted the budget decision will not be “easy” for businesses, she said earlier this month the government “made a commitment during the general election… that we wouldn’t increase taxes on working people”.
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UK economy declined in October
Alpesh Paleja, the CBI’s interim deputy chief economist, said: “There is little festive cheer in our latest surveys, which suggest that the economy is headed for the worst of all worlds – firms expect to reduce both output and hiring, and price growth expectations are getting firmer.
“Businesses continue to cite the impact of measures announced in the budget – particularly the rise in employer NICs – exacerbating an already tepid demand environment.”
He added that firms are looking for Labour “to boost confidence and to give them a reason to invest” in 2025, “whether that’s long overdue moves to reform the apprenticeship levy, supporting the health of the workforce through increased occupational health incentives or a reform of business rates”.
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The CBI’s poll, based on responses of 899 companies between 25 November and 12 December, also found expectations for economic growth were at their weakest since November 2022, in the aftermath of Liz Truss’s resignation as prime minister.
Lucy Powell, leader of the House of Commons, told Sky News’ Sunday Morning with Trevor Phillips the ONS figures were “disappointing” and said that “of course we want to see these things (economic growth) happening faster”.
The Labour MP for Manchester Central said, however: “This is a bit like turning round some huge oil tanker…
“We take a fundamental view here about fixing the foundations, which is about trying to bring some economic stability, which means making sure that the budget adds up, which is something that we didn’t inherit.
“We inherited this big black hole in the public finances which we had to put right.”
Ms Powell then defended raising employers’ NICs, acknowledging while “it was a difficult decision,” it was made “to get money into the front line” of the NHS and other services.
Responding to the CBI’s survey, shadow business secretary Andrew Griffith said: “Since taking office, the chancellor has made this country a hostile climate for aspiration, for investment and for growth.”
The Conservative MP added: “Rachel Reeves’s tax-raising spree and trash-talking her economic inheritance are literally killing businesses and jobs.
“If there is a recession – and based on these CBI expectations that seems increasingly likely – it will be one made in Downing Street. Labour needs to urgently change course before the damage they are doing becomes even greater.”
People whose homes have been destroyed by the floods sweeping across parts of the UK over the past couple of days have been telling Sky News how they coped with the deluge.
In Lincolnshire, where a major incident has been declared, Terry, from Grantham, showed a Sky crew the aftermath of the deluge in his home, which was left under two feet of water.
“Everything’s gone,” he said, adding that he was “devastated”.
The first sign of trouble came at lunchtime on Monday, when his wife woke him and said there was water coming in [to the house], and “within a few minutes, the whole house was flooded”.
They rushed their belongings and pets upstairs, he said, as he revealed the damage to the flooded living room and kitchen, where the water mark was above a power socket.
Terry said the kitchen, where the floor was covered in sludge, smelled of mud and sewage, and their furniture and carpets were wrecked.
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They have no electricity and the food in the cupboards and freezer was “completely ruined”.
Graham Johnson, who lives in a boat with his wife and dog, in the village of Barrow upon Soar in Leicestershire, was in the pub on Monday night, before the water started to rise “rapidly”.
People living in a local caravan park were moved as a severe flood warning was issued.
Mr Johnson said he had gone out “for a couple of pints as usual and, the next thing we know, bingo”.
The couple feared their boat home was about to be swept towards the bridge.
“That’s our pride and joy, where we live, and we didn’t want to lose it,” he said, as he praised the “fantastic” emergency services, who rescued them and their dog after a nervy three-hour wait.
They were two of the 59 people rescued by firefighters in the county, where a major incident was declared and crews were called out to 160 flood-related incidents, the Fire Brigades Union (FBU) said.
Another Leicestershire resident whose home was inundated was Qasim Abdullah from Loughborough.
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Flooding across East Midlands
Pictures taken by the Associated Press show him walking through almost knee-deep water in his living room.
In nearby Quorn, businesses have shut as the main high street has flooded for the second time in as many years.
Two of the pubs in particular have been damaged.
Last year, residents had to launch a crowd fundraiser to help pay for the costs of renovation. Not to mention soaring insurance premiums.
Indy Burmi, who owns a hair salon and restaurant, hasn’t suffered flooding, but said he’s had to close up and cancel all Tuesday’s reservations, as his clients simply can’t get into the village.
And, with more rain forecast, conditions could get even worse in the short term, while residents worry that an annual battle with rising water is now the new normal.
Elsewhere in the UK, the next danger is from ice forming on untreated surfaces after rain on Tuesday evening, the Met Office has said, as it issued a new warning for northern England and Wales from 5pm until midday on Wednesday.
The Royal Liverpool University Hospital has declared a critical incident due to “exceptionally high” demand on A&E and patients being admitted to wards.
The hospital said there had been a spike in people with flu and respiratory illnesses going to emergency departments in recent weeks.
A spokesperson for the hospital said it had a “comprehensive plan in place” and was “taking all the necessary actions to manage the challenging circumstances”.
“We are working with partner organisations to ensure those that are medically fit can leave hospital safely and at the earliest opportunity,” they added.
The hospital warned some people would experience delays as it prioritises the sickest patients.
People whose case isn’t an emergency are being asked to see their GP, pharmacy or walk-in centre – or call the 111 service for advice.
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The Royal Liverpool University Hospital is in the city centre and is the biggest hospital in Merseyside and Cheshire.
Declaring a critical incident can happen when a hospital is experiencing exceptional demand, or sometimes if there is a serious problem with staffing levels.
It indicates it can’t function as normal and allows it to take extra measures to protect patients, such as prioritising the most unwell people and getting support from other agencies.
It could last hours, a few days, or weeks if necessary.
A critical incident was also declared on Friday by the NHS Cornwall and Isles of Scilly Integrated Care Board.
It said it had seen almost four times as many inpatients compared with last year and urged people with flu to avoid going to A&E.