HomeBussinessUK Business Secretary Acknowledges Budget May Squeeze Hiring

UK Business Secretary Acknowledges Budget May Squeeze Hiring

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(Bloomberg) — UK Business Secretary Jonathan Reynolds accepted that tax hikes announced in the government’s budget this week might hinder companies’ ability to hire workers and raise salaries.

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Reynolds, speaking to Bloomberg Television, said the rise in employer national insurance contributions and an uplift in the minimum wage would affect companies, including how many people they employ and what they can pay them. Nevertheless, he defended Chancellor of the Exchequer Rachel Reeves’ budget.

“If you look at the overall tax position within the UK, if you benchmark some of these changes that we’ve had to introduce, there is no doubt the UK is still a globally competitive market,” Reynolds said. “Where you have any kind of pressure on business, of course, that will ultimately be something which affects how that business operates, what they can do in terms of recruitment and pay. We accept that.”

He spoke before the open of UK markets, when a selloff of UK government bonds resumed, reinforcing the challenging outlook for the government as it seeks to persuade investors that it’s restoring stability to the British economy after years of uncertainty under the Conservatives.

Prime Minister Keir Starmer’s government has spent its first few months in office trying to convince global investors the UK is a desirable location. It held an international investment summit and appointed former Darktrace Chief Executive Officer Poppy Gustafsson as investment minister.

Reeves unveiled the new Labour government’s first budget on Wednesday, including £40 billion ($51.6 billion) of tax hikes she said are necessary to strengthen the UK’s fiscal position. But her plans to ramp up spending and investment led to official projections suggesting around an extra £142 billion of borrowing will be needed over the next five years, unnerving the bond market.

The chancellor on Thursday tried to reassure markets by saying in an interview with Bloomberg Television that the government’s “No. 1 commitment” is to “economic and fiscal stability.”

But yields continued to rise on Friday morning, with the yield on the two-year bond up about 3 basis points and the 10-year up 4 basis points at the market open. The two-year yield is on track for a 10th day of increases, the longest streak since 2006.

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