CBI Tells Healey 345 Billion Pound Business Costs Hold Back Investment

CBI Tells Healey 345 Billion Pound Business Costs Are Holding Back Investment

The Confederation of British Industry has called on Chancellor John Healey to reduce overheads facing UK firms ahead of the 28 October budget, warning that rising operational costs are squeezing corporate investment, hiring, and wage growth.

In a 75 page report compiled from cross sector surveys and trade association data, the business group disclosed that British enterprises paid almost 345 billion pounds in total taxes during 2025 to 2026. This represents a 12.7 percent increase compared to the previous year and accounts for 31.3 percent of all UK tax revenue.

The sharpest rise stemmed from employer national insurance contributions following rate increases introduced in the Labour government's initial 2024 budget. Revenue from employer national insurance rose 28 percent year on year to 123.1 billion pounds, overtaking corporation tax as the largest single source of business tax collected by the Treasury.

Energy overheads also weighed heavily on commercial competitiveness. The report showed that non domestic electricity prices in the UK exceeded the median among G7 nations by roughly 45 percent across 2023 and 2024.

Rain Newton Smith, chief executive of the CBI, urged ministers to address commercial overheads through the government's newly established cost of living taskforce. She noted that while Prime Minister Andy Burnham rightly focused on household budgets, "business costs are kitchen table costs too."

"When firms are forced to absorb higher taxes, energy bills and regulatory costs, the consequences are weaker investment, fewer jobs and less scope to raise wages," Newton Smith said. "Business is the economic engine that powers better public services, creates jobs and raises living standards, the very things we need to revitalise our communities and help them prosper."

Core Barriers to Investment

The CBI report outlined four primary structural obstacles currently dampening private sector capital deployment:

• High labour and energy expenses

• Fragmented domestic regulations that inflate compliance overheads

• Unnecessary regulatory friction in trading with the European Union

• Complex taxation frameworks

To unlock corporate spending, the business body urged the Treasury to use the upcoming budget to relieve pressures linked to employment taxes, commercial energy tariffs, and business rates. The CBI represents major employers including Tesco, Centrica, and Lloyds Banking Group, along with sector trade bodies spanning retail, hospitality, food manufacturing, construction, and energy.

Political Framework and Chamber Proposals

In his maiden address to the House of Commons as Prime Minister, Andy Burnham acknowledged that daily life had become "too expensive and too hard for too many" and promised to "bring back hope." However, he declined to comment on potential tax changes in the forthcoming budget, emphasizing that his administration would remain "grounded in fiscal responsibility" as state borrowing costs hit their highest point in nearly two decades. Healey has stated he shares concerns regarding the cost of doing business alongside household cost of living pressures.

The British Chambers of Commerce submitted parallel recommendations to the chancellor. Research by the BCC indicates that domestic policy changes over the past decade have increased operating costs for a typical small or medium sized enterprise by 70 percent.

To support regional firms, the BCC recommended cutting national insurance contributions for staff under the age of 25, reducing business rates and energy taxes, and expanding export support programs. The group suggested funding these measures in part by reforming the pension triple lock.

"We know the government is in a fiscal bind and its choices are limited," said Shevaun Haviland, director general of the BCC. "But support for business is not just money out the door, it generates vital economic returns. Easing cost pressures will give firms breathing space to create jobs, investment and growth. Right now, too many businesses are being held back by ever increasing bills."

The joint appeals build on prior representations made by the CBI warning against further commercial tax burdens under former chancellor Rachel Reeves. The government was approached for comment.

Source: BusinessMatters