Reeves tax raid to 'drive unemployment up to five-year high'

"KPMG said the jobless rate is expected to reach 4.9% in 2026, up from the current 4.7% and well above the 4.1% recorded in August last year, as the labour market struggles with falling vacancies. The consultancy warned that the market was "unlikely to see a reversal in fortune in the near term" amid fears the Government will tighten the squeeze on employers."

"Reeves is grappling with a potential £50bn hole in the public finances caused by weak growth and costly policy U-turns. She has already overseen a record £40bn tax raid on business, including a hike in employer National Insurance contributions branded a 'jobs tax'. But with her fiscal rules under pressure, speculation is mounting that she will need to go further-potentially targeting companies, landlords and investors while maintaining Labour's pledge not to raise taxes on 'working people'."

"KPMG's forecast added to concerns that Labour's workers' rights reforms, which strengthen union powers, could have a 'chilling effect' on hiring. It expects vacancies to continue falling through the rest of the year, with many firms holding back on recruitment until there is more clarity in Reeves's Autumn Budget in November. "As a result, we expect unemployment to gradually rise further over the coming year, increasing from 4.7% in July and peaking at 4.9% in 2026," it said."

Unemployment in Britain is forecast to rise to 4.9% by 2026 as the labour market weakens and vacancies fall. Businesses are delaying recruitment amid expectations of further tax increases under Chancellor Rachel Reeves after a record £40bn business tax package and an employer National Insurance hike. A potential £50bn fiscal shortfall and pressure on fiscal rules increase prospects of additional measures targeting companies, landlords and investors while keeping taxes on working people unchanged. KPMG warns workers' rights reforms could chill hiring. GDP growth is forecast at about 1.2% this year and 1.1% in 2026, compounding the policy challenge.

Read at Business Matters