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Rachel Reeves is facing a double whammy of economic blows as employers warn of the dire impact of her Budget tax hikes.
The number of companies planning to make staff redundant has reached its highest level in a decade outside the Covid pandemic, according to a new survey.
Meanwhile, confidence among small businesses has hit a new record low.
Critics said the findings show the tax raids were “a millstone” around the neck of the economy, while business leaders said the government “urgently” needs to push for economic growth.
Ms Reeves’s national insurance hike has prompted widespread plans to increase redundancies and cut hiring, the Chartered Institute of Personnel and Development (CIPD) said.
A survey of more than 2,000 employers by the organisation found nine in 10 businesses expect their employment costs to rise.
Of these, a third said they plan to reduce staff through redundancies or recruiting fewer workers – and two in five warned they will raise prices.
Peter Cheese, the chief executive of the CIPD, said: “These are the most significant downward changes in employer sentiment we’ve seen in the last 10 years, outside of the pandemic.
“Employer confidence has been impacted by planned changes to employment costs, and employment indicators are heading in the wrong direction.”
A separate survey found that confidence among small businesses hit its lowest recorded level outside the pandemic in the final quarter of last year.
The Federation of Small Businesses (FSB) said a survey of almost 1,400 firms found that those in accommodation and food services were the least optimistic.
Tina McKenzie, of the FSB, said: “The fourth-quarter blues reported by small firms underline how urgently the government’s growth push is needed.
“Small firms are understandably nervous about their prospects as 2025 gets underway.”
The Lib Dems said the findings showed Ms Reeves’s tax measures were “a millstone around the neck” of the economy.
Liberal Democrat Treasury spokesperson Daisy Cooper added: “Her misguided national insurance rise is clobbering small businesses and could end up costing people their livelihoods as companies scramble to cover the costs.
“The only way to see the back of the years of Conservative economic vandalism and rebuild our public services is through growth. That is why it is so baffling to see that the steps taken by the chancellor have only acted as an anchor on our economy with frightening consequences.”
A Treasury spokesperson said: “We delivered a once-in-a-parliament Budget to wipe the slate clean and deliver the stability businesses need to invest and grow, while protecting working people’s payslips from higher taxes, ensuring more than half of employers either see a cut or no change in their national insurance bills, and delivering a record pay boost for millions of workers.
“Now we are going further and faster to kickstart economic growth and raise living standards, with a majority of business leaders confident that the chancellor’s plans will help drive business investment.
“This includes backing businesses to create wealth across Britain by capping corporation tax, making full expensing permanent and permanently cutting business rates for retail, hospitality, and leisure businesses on the high street from next year.”
