Nearly two-thirds of UK companies are set to scale back hiring plans in response to the Chancellor’s £40bn tax hike, according to new polling by the Confederation of British Industry (CBI).

The survey of 266 business leaders found that 62% intend to reduce recruitment, nearly half expect layoffs, and 46% plan to delay employee pay rises.

The findings underscore growing frustration among businesses, particularly in retail and hospitality, over changes such as the increase in employers’ National Insurance contributions and the reduction in the earnings threshold for contributions. These measures come alongside a rise in the national minimum wage and sweeping workers’ rights reforms, adding further financial pressures.

Rain Newton-Smith, CBI’s chief executive, is expected to criticize the government at the CBI’s annual conference. Addressing Chancellor Rachel Reeves directly, she will argue that the tax increases undermine the UK’s competitiveness and growth potential.

“When you hit profits, you hit competitiveness, you hit investment, you hit growth,” Newton-Smith will say. She will emphasize that profits are critical for reinvestment in communities, workforce training, and economic expansion.

Impact on Businesses and Employment

The CBI’s poll reveals a stark response to the Budget:

Hiring Freezes: 62% of businesses plan to hire fewer staff.Layoffs: 47% anticipate reducing their workforce.Delayed Pay Rises: 46% expect to hold back on salary increases.Businesses in sectors like retail and hospitality, which rely heavily on low-wage, part-time employees, are particularly affected by the reduced National Insurance threshold and the rising minimum wage.

The British Retail Consortium estimates the Budget measures will add £7bn to costs for businesses, with major retailers such as Tesco, Marks & Spencer, and Boots already warning of inevitable job cuts.

Newton-Smith will also address the inheritance tax changes affecting farmers, highlighting fears that many may no longer be able to pass their businesses to the next generation. Business leaders are expected to warn the government that rising costs could hinder investment in less economically developed regions, undermining efforts to address the UK’s worklessness crisis.

The Chancellor and ministers are set to face mounting pressure from high street leaders, with a meeting scheduled this week between retail bosses and Gareth Thomas, the minister for services, small business, and exports. Business leaders plan to raise concerns about job losses and recruitment freezes, arguing that higher costs could stifle growth and investment across the country.

As the government prepares to release a white paper on tackling worklessness and boosting employment rates, it faces a challenging balancing act. Newton-Smith’s speech is expected to call for more collaborative policymaking, warning: “Tax rises like this must never again simply be done to business.”