Spring Statement 2025: Chancellor failing businesses as tax hikes kill investment

Business leaders have attacked the Chancellor for failing to recognise that tax and regulatory changes are damaging companies and jobs as she delivered a spring statement that was “light on substance”.

Employers are facing additional national insurance contributions and increases to the national living wage from the start of next month as a result of measures announced by Rachel Reeves in her autumn Budget. Many businesses, which will have been hoping for at least a partial relaxation of those measures in the spring update, have already been rowing back on investment and hiring as a result of the extra cost burden imposed from April. Some smaller firms, particularly in the hospitality and retail sectors, have thrown in the towel.

George Holmes, managing director of Aurora Capital, said: “The spring statement delivered few surprises, but for small businesses, that’s part of the problem. With no new tax or spending support announced, and inflation now down to 2.8 per cent, many SMEs will feel this was a missed opportunity to help them weather the cost pressures they’re still facing.

Chancellor Rachel Reeves leaving 11 Downing Street, London, for the House of Commons to deliver her spring statement to MPs.

“Employment costs are set to rise significantly in April, with higher national insurance contributions and the increase to the national living wage kicking in. Yet, despite clear warnings from business groups, there was no new support to ease the pressure on small employers; no targeted reliefs, no funding boosts, and no signal of short-term help with borrowing costs.”

Sandy Begbie, chief executive of industry body Scottish Financial Enterprise (SFE), said Reeves’ statement “underlines the stark reality of the economic situation we find ourselves in”.

He added: “The current inflationary pressures, coupled with stagnant productivity and increasing levels of tax pose significant headwinds to business investment.

“While welcoming the Chancellor’s commitment to public sector reform and reducing the cost to the taxpayer, there also needs to be a recognition that recently announced tax and regulatory changes are damaging to business and jobs. Simply, you cannot tax your way to economic growth and we need to see a clear industrial strategy that will allow business to invest with confidence and deliver real and sustainable growth.”

Adebola Babatunde, financial planning director at Rathbones, said: “The spring statement may have spared entrepreneurs from new financial pressures, but it fell short of reigniting confidence within the entrepreneurial community. With over 10,000 millionaires reportedly leaving the country last year, today’s statement could have been a pivotal moment to reverse the trend and cultivate a thriving ecosystem for innovation and growth.”

According to the Office for Budget Responsibility (OBR), the overall tax burden in the UK is forecast to rise from the equivalent of 35.3 per cent of GDP (gross domestic product, or the total value of the economy) in 2024/25, to a “historic high” of 37.7 per cent in 2027/28. While that peak is slightly lower than previously forecast, it is more than four percentage points above the pre-pandemic level of 33.2 per cent in 2019/20.

The main driver of the increase in the tax burden is personal taxes, “particularly income tax and national insurance contributions”, the OBR noted.

Luke Bartholomew, deputy chief economist at Scottish investment firm Aberdeen, said: “The key point from today’s announcement is that the £10 billion headroom the Chancellor has restored is very small and remains highly sensitive to adverse market moves or growth developments.

“Indeed, depending on how the market responds to the US tariff announcements scheduled next week, the extent of UK inclusion within those tariffs, and any concessions the UK government makes as part of a deal with the US, this headroom could quickly be wiped out again.”

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