Business leaders and economists have voiced sharp criticism of Keir Starmer’s recent claim that Labour has ‘stabilised the economy,’ highlighting the harsh realities faced by UK firms amid gloomy economic data and contentious fiscal policies. Speaking at the British Chambers of Commerce conference in London, Starmer asserted his commitment to backing businesses fully, citing trade agreements with the US and India as evidence of progress. However, this confident stance contrasts starkly with a series of troubling economic indicators and rising discontent among both backbench MPs and business communities.

Recent figures from the Office for National Statistics reveal that 17 per cent of UK businesses have run out of cash, marking the worst situation since the height of the pandemic. This financial strain is compounded by data from the Confederation of British Industry, which shows retail sales declining for the ninth consecutive month, with the recent drop being the fastest since early 2024. The ongoing impact of Chancellor Rachel Reeves’ National Insurance increase has been singled out by Bank of England governor Andrew Bailey, who noted that firms nationwide are responding by cutting jobs and wages, intensifying economic pressures.

While Starmer confidently stated that Labour had stabilised the economy and was now focusing on renewal, his assertion was met with scepticism and outright backlash. Prominent business figures such as Charlie Mullins, founder of Pimlico Plumbers, criticised the Labour policies, calling the National Insurance hike and other tax increases “vicious” and blaming them for battering struggling businesses. Economists like Julian Jessop from the Institute of Economic Affairs echoed these sentiments, arguing that despite government claims, underlying economic conditions remain weak: slow growth, rising inflation, a deteriorating labour market, and fragile public finances persist, while businesses continue to face high energy costs and additional payroll burdens.

The issue of business viability is further underscored by a surge in voluntary business liquidations, reaching levels not seen since the pandemic. This trend, influenced by recent tax changes raising the business asset disposal relief rate, has prompted many entrepreneurs to close otherwise viable businesses to benefit from lower capital gains tax rates before expected future increases. Economic uncertainty and rising operating costs are also driving this wave of exits, particularly among older business owners nearing retirement. The Treasury defends these tax adjustments as vital for securing public finances and funding the NHS, though critics warn such moves could undermine long-term economic vitality.

Criticism of Labour’s economic strategy extends beyond tax policy. Some commentators highlight a lack of bold vision compared with internationally noted approaches, such as the aggressive industrial and climate policies seen in the United States under President Joe Biden, which are credited with stronger economic performance. Labour’s approach has been characterised by cautious, incremental policies that detractors label as “austerity lite,” risking missed opportunities for robust growth and innovation. Additionally, proposals for welfare and benefit cuts have sparked concern among economists who warn that further reductions in social support could deepen poverty and hardship, undermining social justice and wellbeing.

Trade unions and industry groups also challenge Labour’s narrative around new trade deals. For example, the UK Spirits Alliance dismisses claims that such agreements will substantially boost exports, pointing to the high domestic tax burden that stifles investment and growth potential. Without significant reform of the internal tax regime, they argue, trade deals alone cannot deliver meaningful economic revitalisation.

Experts note that part of the challenge lies in the absence of detailed, comprehensive plans from Labour. While the party stresses partnerships with business to drive economic revival, critics contend that Labour’s proposals lack the specificity and ambition necessary to tackle systemic issues. Investment in public services and decisive government leadership alongside the private sector are cited as critical missing elements.

Broadly, opinions across the spectrum reflect concern that Labour’s current fiscal and industrial strategies may not only fail to stimulate sustainable growth but could exacerbate existing weaknesses in the UK economy. This has led to calls for Labour to rethink its approach, balancing necessary fiscal consolidation with investments and reforms capable of restoring confidence, encouraging enterprise, and promoting social equity.

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Source: Noah Wire Services