The Chancellor announced a range of tax hikes for businesses. (Image: Getty)
Rachel Reeves has been accused of derailing Britain’s economic recovery, while the Bank of England warned that UK growth was now projected at zero.
In October, Reeves delivered Labour’s first budget since taking office, announcing a raft of tax increases for employers, including higher national contributions and lowering the threshold at which these are paid.
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The increases, which total around ￡25 billion, were criticised as being “anti-business” in the wake of the budget, despite Labour pledging to be “pro-growth” throughout the general election.
When Labour took office, Britain had the fastest-growing economy in the G7, but just five months later, that now appears to be a distant memory.
In a new forecast, the Bank of England downgraded its UK growth outlook for the last three months of this year to zero from a previous prediction of 0.3 per cent.
READ MORE: Inside the town where Rachel Reeves is MP - even her own voters have had enough
The budget saw significant tax increases for businesses. (Image: Getty)
Official data published on Wednesday showed inflation rising from 2.3% to 2.6% in November.
Shadow business secretary Andrew Griffith said: “Today’s growth downgrade from the Bank of England follows warnings from almost every business group and forecaster.
“Rachel Reeves has no feel for how to run an economy. Instead, she has already killed jobs, investment and growth on her watch.”
Yesterday, the bank announced it would keep interest rates unchanged at 4.75%.
In November, the Bank's Monetary Policy Committee (MPC) cut the Base Rate to 4.75% from 5%, marking the second reduction of the year. However, with inflation on the rise again, the Bank held off on further cuts this week.
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The Bank of England downgraded its UK growth outlook for the last three months of this year to zero. (Image: Getty)
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Paul Dales, chief UK economist at consultancy Capital Economics, said: “The forecast gives more credence to the idea that the economy is flirting with recession.”
Official figures show that growth had already stalled in the run-up to the Budget - with gross domestic product (GDP) shrinking by 0.1% in October.
Business surveys have suggested that the budget is hurting businesses. A survey of business conditions published by the Bank alongside the rates decision shows that the decision to hike national insurance in the way that they did caught many off guard.
Ms Reeves increased the rate from 13.8% to 15%, lowering the threshold for paying it from ￡9,100 to ￡5,000. She also increased the national living wage.
Jason Shearer, 52 a café owner, told the Express.co.uk that the national living wage increase was “killing” small businesses.
Business owner Ben Hicks in Farsley believes the budget will increase his costs by ￡30k. (Image: Andy Commins / Daily Mirror)
Ben Hicks, owner of Mill Lane Café, was also caught off guard by the increases in national insurance and believes it could add ￡30,000 to his costs next year.
He told the Express.co.uk: “We didn’t expect the national insurance change. We could maybe foresee an increase in contribution but not the lowering of the threshold at the same time – That was a real curveball to work out how to navigate it.”
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Yesterday, Keir Starmer attended a Parliamentary Liaison Committee hearing, where he pleaded with the public to be patient with Labour’s promise to turn around the economy.
The Labour chairman of the Commons Business and Trade Committee told the Prime Minister that firms were “going to be cutting investment, wages and workforce next year” due to the tax hikes, increased minimum wage, and increased employment rights.
Liam Bryne MP warned that businesses were “asking to see a plan for growth and they are struggling to see that right now.”