Chancellor Rachel Reeves has faced significant criticism from business leaders following her recent budget announcement, which many argue contained disappointingly few measures to stimulate economic growth. The criticism comes alongside particularly gloomy forecasts from the Office for Budget Responsibility that paint a challenging picture for the UK economy.
Business Reaction: A Resigned Shrug
The day-after reaction from the non-banking business world could be summarised as a collective shrug of resignation. Many executives expressed amazement that the chancellor offered so few pro-growth initiatives, particularly given the OBR's two key depressing forecasts. The OBR now expects the average growth rate from 2026 to 2029 to be just 1.5%, down from the 1.8% predicted in March. Meanwhile, real-terms annual growth in disposable incomes is projected to be minimal.
One FTSE 100 chair captured the mood succinctly: "There were no positive themes to hold on to or to build on. There was nothing structural to move us forward. The sense of distrust is very high." This distrust has been amplified by weeks of conflicting briefings and speculation in the run-up to the budget, where income tax hikes were reportedly off the table, then on, then off again.
Missing Tax Reform and Growth Strategy
While the banking sector offered some applause – reportedly after strong Treasury encouragement following being spared higher levies – the broader business community found little to celebrate. The most notable piece of tax reform was the introduction of per-mile charging for electric vehicles from 2028, a measure that could no longer be delayed. However, the flashier 'council tax surcharge' for homes valued over £2 million, expected to raise a modest £400 million annually, falls far short of the fundamental overhaul needed for the UK's dysfunctional property taxes.
Significantly, there appears to be zero appetite in government to tackle stamp duty on housing transactions, which many economists consider the most growth-inhibiting tax of all. Meanwhile, the target of building 1.5 million homes during this parliament appears likely to be missed by a considerable margin, with little clarity on how the situation might improve.
Industrial Strategy Delays and Lost Opportunities
The government's industrial strategy also faces criticism for its lack of urgency. Ministers are frustrating major manufacturers by taking an excessively long time to extend the "British industrial competitiveness scheme" – which provides savings on electricity bills – to 7,000 energy-intensive companies. This scheme, intended as the centrepiece of industrial strategy, won't be fully implemented until spring 2027.
Furthermore, stamp duty on shares remains in place, despite its negative impact on London's attractiveness as a financial centre. The chancellor's attempt to encourage ISA savers towards the stock market appears contradictory while this duty persists. The three-year holiday for companies listing in London was widely seen as merely a token gesture.
Helen Miller, director of the Institute for Fiscal Studies, summarised the sentiment: "The chancellor, like her predecessors, continues to shy away from meaningful tax reform that could move the dial. This felt mostly like the budget of a government trying to scrape through."
While businesses acknowledge the chancellor's fiscal challenges and political constraints, the overwhelming call has been for more incentives to invest, hire, and boost the UK's international competitiveness. For a government that maintains growth is its "number one mission," many feel this budget failed to deliver the measures needed to stir the animal spirits required for economic revival.
