Britain’s leading business lobby has warned that Labour’s leadership battle and relentless tax rises on business are freezing private sector hiring and dragging down the country’s economic growth prospects — as unemployment is forecast to rise by 200,000 this year.
The CBI’s latest economic forecast downgrades UK growth from 1.3 to 1.1 per cent for 2025 and from 1.5 to a sharply weaker 0.9 per cent for 2027, as the Iran conflict drives up global costs and domestic political instability compounds the damage. Unemployment is predicted to climb to 5.5 per cent as private sector employers halt recruitment in response to higher employer National Insurance contributions, minimum wage rises and what the CBI describes as an increasingly hostile cost environment.
The organisation paints a troubling picture of a two-speed economy — the bloated public sector continuing to spend and hire freely while the wealth-generating private sector locks up. The CBI warns this divergence is “not sustainable.”
Chief economist Louise Hellem said that elevated global uncertainty made it even more important for the government to get the domestic basics right — and that on the two most critical measures, Labour was failing. “You cannot build growth by continually increasing the tax burden on business, and you cannot solve the cost-of-living challenge without tackling the cost of doing business,” she said.
Hellem also pointed directly to Labour’s internal power struggle — as Andy Burnham and Wes Streeting jostle to replace Sir Keir Starmer as party leader — as an additional drag on business confidence. Political uncertainty at the top of government is deterring firms from committing to investment and long-term hiring plans, she warned, at precisely the moment the economy needs them to do the opposite.
The forecast represents a significant deterioration in the outlook and will increase pressure on a government already facing criticism over its handling of public finances and its relationship with the business community.
