Business confidence has collapsed to its lowest level on record as firms face a 'cacophony of risk' under Labour, bosses of industry warned last night.

In a report that raises fresh questions over Rachel Reeves' handling of the economy, the Institute of Directors said optimism has evaporated in the face of higher taxes, rising employment costs and red tape.

Bosses called on the Chancellor to 'urgently quash rumours of further tax rises for business this autumn' to help restore shattered confidence – now lower than during Covid lockdowns.

Critics argue the £25 billion increase in employer national insurance (NI) contributions and higher minimum wage meted out in last October's Budget have hammered the wider economy – snuffing out growth, costing jobs and driving up prices.

While the economy is slowing, inflation is the highest in the G7 at 3.6 per cent and unemployment has surged to a four-year high of 4.7 per cent.

Next chief executive Simon Wolfson yesterday said he expects 'UK employment opportunities to continue to diminish' this year following the NI hike. 'We believe that this will increasingly dampen consumer spending as the year progresses,' he added.

The IoD's monthly Economic Confidence Index crashed to minus 72 in July from minus 53 in June. 

That was the lowest reading since the survey started in July 2016. The index stood at plus 7 in July last year – underlining just how fast confidence has collapsed under Labour.

IoD chief economist Anna Leach urged Labour to rule out further tax hikes on business. 

'Damaging speculation around tax rises in the lead-up to the 2024 Budget caused many firms to pause investment and hiring decisions – contributing to six months of near-zero economic growth,' she said.

'With ripple effects through the economy from tax changes and signs of consumer retrenchment, many firms report that they are struggling to plan amid a cacophony of risk.

'The Government must urgently quash rumours of further tax rises for business this autumn.'

Tory business spokesman Andrew Griffith said: 'Labour have spent the last year attacking private enterprise with the zeal of a Left-wing student union so it's no surprise IoD members have lost confidence.