Rachel Reeves has refused to rule out future tax rises after Office for National Statistics figures revealed that the economy shrank by 0.3% in April. The Chancellor told the BBC: “No Chancellor is able to write another four years of Budgets within a first year of government, you know how much uncertainty there is in the world at the moment.” This came after Paul Johnson, director of the Institute for Fiscal Studies think-tank, said: “With spending plans set, and ‘ironclad’ fiscal rules being met by gnat’s whisker, any move in the wrong direction will almost certainly spark more tax rises.” Meanwhile, Ruth Curtice, chief executive of the Resolution Foundation, suggested that the Chancellor “will likely need to look again at tax rises in the autumn.” Lindsay James, investment strategist at wealth management company Quilter, commented: “With the economy now weakening, we can expect to see concerns around further tax rises increase as we near the autumn Budget – which is likely to weigh on growth even more.”

An analysis of company filings reveals a significant rise in business leaders departing the UK, driven by concerns over changes to the non-domiciled tax regime. Over the past year, more than 4,400 directors have left, with a 75% increase in departures noted in April compared to the previous year. The recent abolition of the non-dom tax regime, which previously allowed wealthy foreigners to shelter their assets for a fee, has led to fears of a talent exodus. A survey by Oxford Economics indicated that 60% of tax advisers expect over 40% of their non-dom clients to leave within two years.

According to the latest Business Owners Sentiment Survey by S&W, 39% of UK entrepreneurs are contemplating relocating their businesses overseas due to the Government’s stringent tax policies and the stagnant economy. Nearly half of the respondents, 47%, believe that these policies are hindering their growth. The survey highlights the impact of a £40bn tax raid announced in the Budget, with 43% of entrepreneurs indicating that changes to inheritance tax could prompt them to leave the UK.

According to a survey by Adam Smith Insights, only 5% of Britons are confident that their taxes are being spent effectively. The poll of over 1,000 people revealed that 52% believe taxes are too high, while 58% feel their tax burden has increased in recent years. It was shown that 57% of respondents support tax cuts, with 28% willing to back cuts even if it means reduced public spending. James Lawson, Chairman of the Adam Smith Institute, said: “Brits are being overtaxed and underserved.”

Ministry of Justice data shows that employment cases at the Tribunal surged by 32% in Q1 compared to the same quarter last year. The Employment Lawyers Association has urged the Government to allocate resources to Tribunals before the Employment Rights Bill comes into force, with chairman Caspar Glyn KC saying: “The past figures are of real concern, but of yet more concern is the future.” The Bill, if passed, will deliver 28 reforms, including a change that would enable employees to issue claims on the first day of employment. Under the current system, employees must have two years of service before filing a claim. Mr Glyn KC said the Tribunal “cannot cope with the rising tide of employment litigation,” adding that the it “will drown under the weight of the increased litigation created by the new rights” if they come into law.

Research by KPMG and the Recruitment and Employment Confederation (REC) reveals that the number of jobseekers surged to its highest level since 2020 in May, with a notable increase in candidate availability. While there was a decrease in permanent placements, the availability of candidates increased at the quickest rate in nearly four-and-a-half years. It was also shown that salary growth for full-time staff rose at the quickest pace in nine months and pay for part-time workers increased at the fastest pace in a year. Jon Holt, group chief executive and UK senior partner at KPMG, said: “Employers are still holding back on hiring, which meant last month the number of jobseekers increased at the steepest rate since 2020.” Neil Carberry, REC chief executive, said: “More encouraging signs in temp billings, vacancies and stabilising private sector demand offer a measure of optimism as we head into the second half of the year.”

The House of Lords has criticised City regulators for imposing excessive compliance burdens on firms, with the Financial Conduct Authority and Prudential Regulation Authority accused of fostering a “deeply entrenched risk-averse culture” that hampers growth. The Lords’ financial Services Regulation Committee highlighted that UK firms bear disproportionately high compliance costs compared to their international counterparts. In a 141-page report, they condemned the regulators for “mission creep” and duplicative requests for information. Lord Forsyth of Drumlean emphasised the need for “more proportionate regulation” to promote growth without compromising consumer protection. He also called for the FCA to clarify compliance with the new consumer duty imposed in 2023, saying: “One of the great ironies of all this is that regulations designed to protect consumers have had the opposite effect.” The committee has also urged regulators to move away from a “risk-averse culture” and adopt Singapore’s efficient, business-friendly approach to enhance economic growth and attract foreign investment.

Nikhil Rathi, chief executive of the Financial Conduct Authority (FCA), has expressed concerns over delays in the UK court system that hinder justice for victims of financial crime. He said: “Justice deferred is sometimes justice denied,” highlighting the impact of prolonged court battles on the FCA’s investigations. The FCA has faced criticism for its slow progress in high-profile cases, with the All-Party Parliamentary Group on Investment Fraud having accused the City watchdog of “leaving more than 500,000 people in the dark” due to a lengthy investigation into disgraced fund manager Neil Woodford. Mr Rathi noted that some cases require extensive digital evidence and can take years to resolve, with trial dates for certain cases not expected until 2026 or later.

Investigations into pandemic fraud cases have been put in jeopardy due to improper evidence gathering by the National Investigation Service (NATIS). A report by Mazars revealed that only three of NATIS’ 108 investigators had the necessary powers, raising concerns that “if officers had been exercising powers with expired secondments, their actions could be legally challenged.” NATIS, which was tasked with investigating the £46.5bn bounce-back loan scheme, secured only 14 convictions after receiving £38.5m in taxpayer funding. The Department for Business and Trade said that ongoing viable cases would be transferred to the Insolvency Service, asserting confidence that no convictions would be overturned.

Office for National Statistics (ONS) data shows that the UK economy shrank by 0.3% in April. This marks a decline on the 0.2% growth recorded in March and is the steepest fall since October 2023. Analysts had forecast a 0.1% decline. Analysis shows that the services sector contracted by 0.4% while manufacturing dropped 0.9%. Chancellor Rachel Reeves described April’s GDP figures as “disappointing” but “not entirely unexpected, given the uncertainty that is out there in the world at the moment.” Yael Selfin, chief Economist at KPMG UK, said trade tensions would have “weighed on the economy” while trade deals will likely not prevent “sluggish” growth throughout the rest of the year. Suren Thiru, of the ICAEW, said: “These figures suggest that the UK’s economic fortunes took a notable nosedive in ‘Awful April’.” Capital Economics’ Paul Dales commented: “We’re still expecting GDP growth of just 1% for the year as a whole, which would be no better than last year and is a little weaker than the consensus.”

The FTSE 100 index closed at a record high yesterday, rising 0.2% to 8884.92. This saw the index exceed the previous closing record of 8871.31, which was set on March 3. The index also beat its previous intraday high after hitting 8,892.36. Charles Hall, head of research at UK investment bank Peel Hunt, said the UK and Europe have benefited from the fact that investors “have been allocating away from the US,” while Trevor Greetham, multi-asset portfolio manager at Royal London Asset Management, noted that the UK market “has a lot going for it.” Dan Coatsworth, investment analyst at AJ Bell, said: “The UK stock market has been a star performer this year.”