Business leaders have sharply criticised Prime Minister Keir Starmer’s assertion that Labour is fully supporting firms amid worsening economic challenges. Speaking at the British Chambers of Commerce (BCC) conference in London, Starmer claimed that his government had “stabilised the economy” and was backing businesses “to the hilt,” citing trade deals with the US and India as evidence of progress. However, these declarations were met with scepticism as recent data painted a grimmer picture of the economic environment confronting UK companies.

The Office for National Statistics revealed that 17 per cent of businesses have exhausted their cash reserves, marking the worst liquidity situation since the pandemic. The Confederation of British Industry (CBI) reported a continued decline in retail sales for the ninth consecutive month, with January’s drop representing the fastest fall since January 2024. Bank of England governor Andrew Bailey highlighted the adverse effects of Labour’s National Insurance hike, noting that firms are cutting jobs and wages as a consequence. These struggles are being exacerbated by increasing costs and economic uncertainty, indicating that the economy remains fragile despite the government’s optimistic messaging.

Critics from the business community responded strongly to Starmer’s claims. Charlie Mullins, founder of Pimlico Plumbers, castigated the Prime Minister for his “brass neck” in presenting himself as a champion of business, arguing that Labour’s tax and National Insurance increases had severely damaged firms within just one year. Similarly, Julian Jessop, economics fellow at the Institute of Economic Affairs, stated that “very little has changed for the better” under Labour, pointing to sluggish growth, rising inflation, a weakening labour market, and higher interest rates relative to other economies. Jessop also noted that burdensome energy prices and payroll costs continue to weigh heavily on businesses, while forthcoming legislative changes add further uncertainty.

The scepticism extends to the touted trade deals; Karl Mason, spokesperson for the UK Spirits Alliance, dismissed the government’s trade achievements as “nonsense,” saying that the heavy domestic tax burden stifles investment in export growth, rendering such deals largely ineffective without substantial domestic tax reform.

Further economic indicators underscore the challenging environment. Corporate restructuring and insolvency rates have surged, driven by pressures such as anticipated minimum wage hikes, increased national insurance contributions, elevated borrowing costs, and geopolitical tensions. Smaller businesses, particularly vulnerable due to limited access to expert restructuring advice, are facing higher risk. Corporate insolvencies hit a five-year peak in January 2025, with manufacturing, construction, and recruitment sectors notably affected.

The retail sector’s woes are confirmed by multiple sources with somewhat differing nuances. While the CBI reported a sharp decline in sales volumes and deteriorating outlooks for future sales, data from the Office for National Statistics showed a surprising 1.7 per cent rise in January’s retail sales, the strongest growth since May 2024. This was interpreted by some economists as a sign of consumer resilience, although others pointed out that gains in retail might have come at the expense of hospitality and that the overall consumer spending landscape remains subdued amid ongoing cost-of-living pressures. The British Retail Consortium added that January sales growth on the high street was underwhelming, affected by multiple external factors such as poor weather and strikes.

On the corporate front, profit warnings remain frequent, with one in five publicly listed UK firms issuing alerts amid rising costs and hesitancy to invest. The sectors most impacted include business services, industrial suppliers, and recruitment. Moreover, entrepreneurial activity has seen a rise in voluntary business liquidations linked to recent changes in tax policy, specifically the alterations in business asset disposal relief rates, which have prompted some business owners to exit the market.

This combination of rising cost burdens, economic uncertainty, and cautious consumer behaviour paints a complicated backdrop to the government’s claims of economic stabilisation. As Labour grapples with internal divisions and hostile economic data, the challenge remains to reconcile political messages with the tangible difficulties faced by businesses across the country.

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Source: Noah Wire Services