CBI says budget uncertainty threatens SMEs as business pressures mount

Rain Newton-Smith used her keynote address at the CBI’s annual conference to warn ministers that the government’s push for economic growth risks being undermined unless it reins in policies that are piling pressure on small and medium-sized companies, arguing that the coming Budget must provide stability rather than another round of short-term fixes.

The CBI director-general said smaller firms were already grappling with rising operating costs, delays in planning and infrastructure delivery and some of the highest electricity prices in the world. But she reserved her sharpest criticism for the Employment Rights Bill, which eight in ten CBI members say would make hiring harder in its current form. Newton-Smith said the bill risked unintentionally suppressing job creation by increasing uncertainty for employers, particularly those without substantial HR or legal capacity.

Her remarks come as the government prepares to deliver a Budget overshadowed by a fresh fiscal shortfall only a year after raising business taxes to plug a multibillion-pound gap. Many smaller companies, the CBI chief said, are braced for further surprises after what she characterised as a cycle of “rumours, U-turns and uncertainty” that has left investment plans frozen and confidence fragile. She contrasted the government’s rhetoric on growth with what she said were repeated episodes of policymaking that have “loaded on costs before profits are even made”.

Newton-Smith acknowledged that ministers had taken steps in areas such as planning reform and long-term capital spending. However, she argued that many flagship industrial, trade and infrastructure strategies amounted to plans “on paper” rather than delivery on the ground. For smaller firms facing tightening margins, she said, the gap between strategy and implementation was increasingly difficult to bridge without clearer signals from Whitehall.

With business rates described as “actively holding firms back” and electricity costs continuing to outstrip those faced by international competitors, the CBI called for the Budget to prioritise reforms that reward investment and provide a predictable framework for hiring. Newton-Smith urged the government to rethink its employment rights package through a new social partnership model involving business and unions, similar to the approach that underpinned the introduction of the minimum wage.

She also pressed the chancellor to offer more clarity on energy policy, arguing that short-term patches to pricing mechanisms and grid investment were creating prolonged uncertainty for firms planning expansions or electrification. A long-term settlement recognising the role of the North Sea during the transition, she said, was vital to easing the cost burden on smaller manufacturers and service providers.

The director-general warned that another Budget marked by “tinkering” and politically driven choices could entrench a stop-start economy, leaving small businesses carrying disproportionate risks. Stability, she argued, is the precondition for growth and must form the foundation of any credible fiscal package this week.