The state of Britain’s stalling economy is “disappointing”, a Labour cabinet minister has admitted, as a leading business group said the country’s fiscal outlook was “headed for the worst of all worlds” next year.
The Confederation of British Industry (CBI) said there was “little festive cheer” before the new year, with expectations for economic growth at their weakest since Liz Truss was in No 10.
Lucy Powell, the leader of the Commons, said she understood the public’s frustration with Labour’s tenure so far. “We knew [governing] was going to be difficult,” she said. “I think the voters and the public knew it was going to be difficult too, that’s why they voted for change because we knew the country was in such a bad situation.
“I can understand people’s frustration. It’s a frustration that I share, because we want to make things better, faster for people.”
The Labour government looks likely to end the year with a slump in the polls after the Bank of England’s warning that it expects zero growth in the final quarter.
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There have even been discussions among Labour figures over whether Sir Keir Starmer will lead the party into the next election after his first six months as prime minister were overshadowed by unpopular decisions, including scrapping the winter fuel payment and refusing to compensate the Waspi women who argue that 3.6 million women born in the 1950s were not properly informed of the rise in the state pension age to bring them into line with men.
Businesses have expressed concerns over reforms to workers’ rights, which The Times reveals today could mean bosses being forced to choose between offering millions of part-time workers’ full-time contracts or making them redundant.
Andrew Sentance, the economist and a former member of the Bank of England’s monetary policy committee, said that measures in the budget were feeding into the Bank’s caution over reducing interest rates.
Writing in The Times he said: “In a number of ways, the measures announced in and around Rachel Reeves’s October budget risk aggravating upward pressures on inflation.”
However, Powell insisted: “We’ve begun to start moving it in the right direction … We’ve had to take some difficult decisions so that we could get the money into the front line of the NHS and skills and education, and sort out our transport system and really start putting working people at the front of the queue again.
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“And that’s been a really difficult job that we’ve had to do. We didn’t think it would be popular, but hopefully people will judge us in four years’ time on whether they feel better off and whether their public services have improved.”
• Even Labour veterans are calling it the worst start by a government in a lifetime
Findings released today by the CBI show that businesses expect to reduce both output and hiring in the new year.
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.”
The rise in employers’ national insurance contributions, expected to raise about £25 billion a year, was highlighted as one reason for the gloomy outlook. But a Treasury spokesman said: “More than half of employers will either see a cut or no change in their national Insurance bills.”
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The CBI’s growth indicator survey, based on responses from 899 companies between November 25 and December 12, showed expectations for growth at their weakest since November 2022, after Liz Truss’s chaotic time as prime minister.
Sir Howard Davies, the former chairman of NatWest and the Financial Services Authority, told Times Radio: “There’s very little momentum in the economy at the moment and the figures for the last couple of months suggest that we are bouncing along close to zero.
“The noticeable feature of the British economy if you compare us with others — even relatively slow-growing economies in continental Europe — is that our investment rate is poor, both public sector investment and private sector investment.”
A Treasury spokesman said the government had “wiped the slate clean and delivered the stability businesses so desperately need”. He added: “We have capped corporation tax at the lowest rate in the G7, provided 40 per cent business rates relief next year for 250,000 properties where there were no plans to do so, launched a ten-year infrastructure strategy and are creating pension mega-funds to boost investment in British businesses, infrastructure and clean energy.”
