The UK economy is facing a recession, according to a survey by the Confederation of British Industry (CBI). Alpesh Paleja, the organisation’s 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.” Responding to the findings, Andrew Griffith MP, Shadow Business and Trade Secretary, said: “Since taking office the Chancellor has made this country a hostile climate for aspiration, for investment, and for growth.” In recent weeks, the Bank of England has downgraded its growth forecasts, indicating stagnation, while inflation has reached an eight-month high. The Government insists that the national insurance hike is necessary for funding the NHS, but critics argue it is detrimental to business confidence and economic growth.

Small businesses in the UK are facing an overwhelming wave of additional costs that could lead to widespread bankruptcies, says Michael Lynn in the Telegraph. The Labour Government’s recent policies, including reforms to sick pay and rising electricity charges, are imposing significant financial burdens, he asserts. The Federation of Small Businesses highlights that sick pay costs could double, while electricity standing charges have surged from £31 to £190 daily over six years. Furthermore, new employment rights and taxes on business-class flights add to the financial strain. As one commentator said: “The blizzard of extra charges will drive small businesses into bankruptcy.” With these levies imposed regardless of profitability, many entrepreneurs may find it increasingly unviable to continue operating, leading to a potential wave of closures by 2025.

Rachel Reeves’s tax raid has plunged Britain into a “hiring recession,” according to major recruiters. Michael Stull from ManpowerGroup noted: “Hiring just came to a halt in November,” with part-time and lower-paid jobs facing the brunt of the impact. Stull expressed concern over the lack of recovery, stating: “I do not see a big bounce back.” Additionally, J C Townend from Adecco warned that Labour’s changes to workers’ rights could deter job creation, particularly in sectors reliant on flexible staffing.

The British Chambers of Commerce (BCC) has called for a policy “reset” following a survey revealing that only 15% of over 1,000 member companies believe the trade and cooperation agreement (TCA) with the EU has boosted their sales. Director General Shevaun Haviland said: “The Government has talked a lot about a new era of trade relations with the EU. But firms are grappling with increasing costs off the back of the autumn budget and this change cannot come soon enough.” Key demands from businesses include easier movement of UK staff to the EU, improved VAT requirements, and mutual recognition of professional qualifications. The BCC also highlighted that 77% of businesses are unaware of new EU regulations affecting exports from January. A government spokesperson mentioned efforts to strengthen ties with the EU while maintaining current trade agreements.

As discussions on a new UK-EU relationship continue, smaller businesses are feeling the strain of post-Brexit trade barriers. Research from the Centre for Economic Performance revealed a £27bn decline in goods exports to the EU, with smaller firms particularly hard hit. Rana Harvey, managing director of Monster Group, highlighted the ongoing “friction” in trading with Europe, stating: “There is still so much red tape that never existed before.” Other entrepreneurs echoed similar sentiments, citing increased costs and labour shortages as significant challenges.

The UK economy is facing a significant downturn, prompting concerns that Chancellor Rachel Reeves may need to reconsider her commitment to avoid tax increases. Analysts warn that rising inflation and high borrowing costs could lead to lower tax receipts, jeopardising the Government’s financial stability. The EY Item Club highlighted that “more than half the Chancellor’s spare funds during this parliament could be wiped out” due to unexpectedly high interest rates. With inflation rising to 2.6% and wage growth at 5.2%, the Bank of England is likely to maintain elevated interest rates, further impacting household spending. The Office for Budget Responsibility predicts government borrowing will reach nearly £130bn this financial year, leaving Reeves with limited room to manoeuvre.

Government borrowing decreased to £11.4bn in November, £3.4bn lower than the previous year, marking the lowest November borrowing in three years. The decline was attributed to increased tax receipts, which rose by £3.8bn, including £1.6bn from income tax and £1bn from corporation tax. Central government expenditure also fell by £200m, primarily due to reduced interest costs, which dropped from £7.7bn to £3bn. Dennis Tatarkov, senior economist at KPMG UK, noted that while this provides a “temporary respite on public sector borrowing,” rising inflation may lead to increased interest costs in the future. Despite the positive news, public sector net debt remains high at approximately 98.1% of GDP, reflecting ongoing financial challenges.

SureScreen, a Derby-based diagnostics company, has controversially paid a £60m dividend despite declaring insolvency in its main trading business. The company, which secured £515m in state contracts during the COVID-19 pandemic, reported a loss of £21.3m for the year ending May 2023, down from a £35.6m profit in 2022. The auditor’s report highlighted concerns over the company’s financial stability, stating that “material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern.” David Campbell, a director at SureScreen, acknowledged the company’s insolvency but indicated they were seeking legal advice to address intercompany loans. He defended the dividend, stating that SureScreen had invested heavily in UK manufacturing during the pandemic.

Harvey Jones reflects on the Bank of England’s decision to hold interest rates at 4.75% in the Sunday Express, noting that the move will prove disappointing for homebuyers, but savers will be pleased. Markets were anticipating six rate cuts in 2024, Jones notes, but we got only two. Inflation could remain persistent into next year as Donald Trump brings tax cuts and tariffs, further dissuading the BoE to take action. But, if the UK’s economic plight worsens, the BoE could cut its headline policy rates faster, says PwC economist Barret Kupelian. However, Liam Halligan tells Telegraph readers that the BoE could be forced to increase rates to tame a price rise spiral brought on by higher wages and increased business costs. He goes on to warn that Labour’s “rash decision to push up borrowing and spending even more is now starting to spook the investors who bankroll government.”

The ability of the Office for National Statistics to supply meaningful data has been brought further into doubt after it was revealed response rates to its UK GDP and inflation survey have fallen.