A poll of businesses indicate a significant decline in growth expectations among private sector firms, with forecasts reaching their lowest point since September 2022. According to the Confederation of British Industry’s (CBI) Growth Indicator survey, 30% more firms anticipate a decrease in activity over the next three months. The services sector is particularly affected, with a 32% net negative sentiment, marking the weakest expectations since November 2022. Anticipated declines in business and professional services (-29%) and consumer services (-43%) are also notable. As Chancellor Rachel Reeves prepares for her first spending review, Alpesh Paleja, deputy chief economist at the CBI, says the Government has the opportunity to foster economic growth through initiatives like the Made Smarter Programme and a National Tech Adoption Plan.

Despite facing ongoing challenges linked to tax hikes and tariffs, British manufacturers saw an increase in performance in May. S&P Global’s latest PMI hit 46.4 in May, compared to 45.4 in April. Despite the slight increase, the reading remains in negative territory on an index where a figure above 50 points to growth. S&P said a “combination of weak global demand, turbulent trading conditions and rising cost burdens” led to reduced levels of output, new orders, exports and employment. Rob Dobson, director at S&P global market intelligence, said: “May PMI data indicates that UK manufacturing faces major challenges, including turbulent market conditions, trade uncertainties, low client confidence and rising tax-related wage costs.” Despite challenging conditions, nearly 50% of manufacturers expect to see output increase over the next 12 months, up from 44% in April.

Growth expectations among private sector firms have fallen to the lowest level since September 2022, according to the Confederation of British Industry’s (CBI) Growth Indicator survey. The analysis shows that 30% more private sector firms are expecting activity to fall than to grow over the next three months. This was driven by predictions of declines in business and professional services (-29%), and consumer services (-43%). Alpesh Paleja, deputy chief economist at the CBI, said: “Our surveys were already pointing to weaker momentum than official data at the start of this year, and this sluggishness looks to have continued since.”

Ministers have been urged to reform high taxes on electricity bills, with Make UK warning that prices threaten the Government’s industrial strategy. This comes with analysis showing that energy bills for UK manufacturers are 46% above the global average. The Government claims its British Industry Supercharger programme will save businesses £5bn over the next decade, while exploring long-term energy market reforms.

The number of income taxpayers in the UK has surged to 37.7m for the 2024/25 tax year, marking an increase of 6.2m over the past five years. This rise is attributed to frozen personal allowances, which have not changed since 2021/22, despite rising inflation. Clare Stinton, head of workplace saving analysis at Hargreaves Lansdown, said: “Frozen income tax thresholds are quietly reshaping the tax landscape, with millions more people now paying tax.” The freeze is expected to remain until 2028, further intensifying the tax burden on households, particularly affecting lower earners and pensioners. Critics argue that the Government is employing stealth taxes to support the economy rather than openly increasing tax rates. James Murray, Exchequer Secretary to the Treasury, acknowledged the concerns but emphasised the need for fiscal responsibility.

Sir Keir Starmer has resisted calls from within the Labour Party for tax hikes, ruling out wealth taxes and suggesting that the current tax burden is already “high.” While Labour figures including deputy leader Angela Rayner and former Prime Minister Gordon Brown have suggested that higher taxes could cover the cost of increased public spending, the Prime Minister argued: “I don’t think you can tax your way to growth.”

At least 10% of the UK’s non-doms left the country last year following a Government crackdown on the tax status. According to a study by former Treasury economist Chris Walker, founder of economics consultancy Chamberlain Walker, a minimum of 25,000 non-doms or former non-doms left Britain in 2024. Warning that an exodus of non-doms could create a £34bn black hole in the public finances and wipe out the Chancellor’s fiscal headroom, Mr Walker said additional tax rises could be required to make up for the lost revenue.

Tom Bradshaw, President of the National Farmers’ Union, has called for “catastrophic” inheritance tax changes to be scrapped, warning that they could lead to “major cuts to investment and significant job losses.” This comes after a report by Family Businesses UK highlighted the detrimental effects of the reforms on businesses which rely on inherited assets for viability. Mr Bradshaw described the tax as “flawed, badly thought-out, and destructive,” urging the Treasury to reconsider its approach. He proposed a clawback policy allowing tax payments to be deferred until inherited assets are sold, alleviating immediate financial burdens.

Analysis by Savills suggests that changes in the way lenders stress test borrowers for mortgages could see a spike in first-time buyers able to access the housing market. A recent change in guidance from the Bank of England means lenders are no longer required to stress test borrowers at the Standard Variable Rate plus 1%. Savills says first-time buyer transactions could increase by up to 24% over the next five years on the back of rules being relaxed. However, the estate agent warned that a 24% increase in first-time buyers could see house prices to rise by 7.5% more than currently predicted.

Bank of England policymaker Catherine Mann says the Bank needs to consider the impact of its quantitative tightening programme. She said that now the Monetary Policy Committee is cutting interest rates, “we need to consider the differing effects of our policies on different parts of the yield curve and their effects on monetary policy transmission as a more salient issue.”

A majority of Labour MPs oppose Chancellor Rachel Reeves’ fiscal rules, with 64% saying they inhibit ministers’ abilities to meet their objectives. The poll also shows that 20% would prefer tax rises over spending cuts. A separate poll shows that 59% of those who voted Labour in 2024’s general election would prefer increases to taxes or borrowing over cuts.