Rachel Reeves may need to implement further tax increases next year following a concerning growth downgrade that has left Britain on the brink of recession. Paul Johnson, director of the Institute for Fiscal Studies, warned that the Chancellor could face “coming back for more” tax rises in the autumn due to a revised economic growth estimate of zero for the third quarter of 2024. The economy also shrank by 0.1% in October, raising fears of two consecutive quarters of negative growth. Living standards have declined, with GDP per capita falling by 0.2% compared to the previous year. Johnson cautioned that higher inflation could complicate Reeves’s efforts to manage borrowing costs, indicating that “it’s going to be an incredibly tight spending review next year.” Meanwhile, Sir Keir Starmer has warned that economic prosperity “won’t happen overnight” as the Prime Minister failed to rule out having to raise taxes further to balance the books.

HM Revenue and Customs (HMRC) has come under fire for its handling of an IT error that has led to incorrect penalties being applied to some customers’ VAT accounts. The issue, which affected VAT returns submitted on 7 December 2024, resulted in these returns not being processed, despite being filed on time. Tax expert Dan Neidle highlighted the lack of communication from HMRC, stating: “They haven’t emailed/written to affected taxpayers, and so many won’t know this.” An HMRC spokesperson acknowledged the problem, assuring that any wrongly applied penalties would be removed and that they are “working swiftly to correct them.”

Business confidence in the UK has fallen to its lowest level in 2024, dropping two points to 39%, according to the latest Lloyds Business Barometer. Despite this decline, 55% of businesses expressed optimism about the broader economy, with nearly two-thirds anticipating stronger output. However, 19% of respondents plan to reduce their workforce, the highest figure in nine months. Additionally, 64% of companies expect to raise prices, complicating efforts to curb inflation. Paul Kempster, managing director for relationship management at Lloyds, said: “Although overall confidence dipped this month, we’re still optimistic that firms’ trading prospects will return to the levels seen earlier this year.”

Shevaun Haviland, the director-general of the British Chambers of Commerce, writes in the Telegraph on the Government’s efforts to put trade at the centre of its mission to generate growth. Haviland says that, despite geopolitical complexities, it is hoped Labour can generate a “bold vision for Britain that keeps the global trade system as open as possible, and increases investment and the contribution of exports to growth.” Ms Haviland says ceded sovereignty back to the EU is a price tat must be paid for improved access to its market, while domestic regulation should be reformed to encourage more long-term private sector investment.

Aviva has announced its acquisition of Direct Line for £3.7bn, a move that will create one of the largest motor insurers in the UK. The deal, which involves a payment of 275p per share, represents a 73.3% premium over Direct Line’s previous closing price. However, the merger is expected to lead to approximately 2,000 job cuts as Aviva aims to achieve £125m in cost savings.

Working from home (WFH) has become a double-edged sword for many Brits. While it offers convenience, a recent survey reveals that around 40% of the workforce is feeling the strain. According to the Office for National Statistics (ONS), half of remote workers are increasingly frustrated by challenges such as unproductive video calls and distractions. Notably, 90% believe many video meetings could have been emails, and a third feel less productive at home. Despite these concerns, a significant portion of workers would rather quit than return to the office full-time.

The latest data from the Office for National Statistics indicates that the UK economy did not grow in the third quarter of 2024, contradicting earlier estimates of a 0.1% increase. This stagnation places the UK alongside Italy as the lowest growth performer in the G7 during this period. Additionally, growth for the second quarter was revised down to 0.4%. Furthermore, real household disposable income per person showed no growth, following a previous increase of 1.4%.

The Labour Government has announced a consultation on its zero emission vehicle targets after carmakers warned of mass layoffs due to the forced shift away from petrol and diesel engines.