Rachel Reeves has been blamed for leaving firms in 'limbo' amid intense pre-Budget speculation as private sector activity slumped at the fastest pace since the pandemic.
Figures from the Confederation of British Industry (CBI) revealed the sharp slowdown came as businesses put plans on hold amid uncertainty over the Chancellor's tax plans.
Meanwhile a separate report showed a continued run of job losses in the 'worryingly weak' manufacturing sector, which was also affected by pre-Budget gloom.
And the Chancellor was criticised by a top City boss over the prolonged 'kite-flying' – selective leaking of policy ideas under consideration – ahead of last week's event.
Meanwhile, UK ten-year borrowing costs briefly spiked to more than 4.5 per cent yesterday as the fall-out from the Budget continued.
That followed the release of a report into a leak fiasco involving the Office for Budget Responsibility (OBR), Britain's fiscal watchdog.
The latest developments illustrated that the chaotic run-up to last week's event has had real world repercussions for businesses and the economy.
Ms Reeves is under pressure over false claims that she had faced a financial black hole of more than £20 billion – which might have meant she had to embark on a manifesto-breaching hike in income taxes. In fact, she had a surplus of several billion pounds.
Speculation about the fiscal situation – and the tax hikes that might result – has left businesses in stasis for months.
The CBI's latest monthly private sector growth survey revealed that activity suffered its biggest fall in November since August 2020.
And the poll – completed before the Budget – also showed firms expect a further decline in the next three months.
It extends a period of gloom going back to the autumn of 2024 and Rachel Reeves' first Budget.
CBI deputy chief economist Alpesh Paleja said some of the downturn in growth expectations 'may be down to jitters' ahead of the Chancellor announcing her plans last week.
'Businesses tell us that much of the month passed in limbo ahead of that, with big discretionary spending and investment on hold,' Mr Paleja said.
That piled on pressure for firms already being squeezed by a cautious mood among consumers and rising costs, Mr Paleja added.
Meanwhile, a closely-watched monthly survey of the manufacturing sector yesterday showed it barely grew last month.
A reading of 50.2 – where the 50-mark separates growth from contraction – meant that Britain's factories were close to stagnation. That was at least a slight improvement after more than a year of decline for the sector.
But firms continued to shed jobs – for the thirteenth month in a row – as firms looked to cut costs, freeze hiring, and make redundancies.
Increases in the minimum wage and employer national insurance were also blamed as well as 'uncertainty in the lead up to the UK Budget', according to the purchasing managers' index (PMI) survey compiled by financial firm S&P Global.
Rob Dobson, director at S&P Global Market Intelligence, said November had seen 'elevated levels of business certainty, and in some cases gloom, ahead of the autumn Budget'.
He added: 'Despite the improvement in the performance of the manufacturing sector, any growth is still worryingly weak.'
Meanwhile, Steven Fine, chief executive of City broker Peel Hunt criticised the Chancellor over the months of pre-Budget speculation that took place.
'I think it's probably fair to say kite-flying is never a good strategy over a prolonged period of time. Because the markets like certainty – either you are, or you aren't,' he told the Mail.
And on the Budget 'smorgasbord' of measures including dividend taxes and salary sacrifice raid, Fine said it 'normally means there's something for everyone to like… what this one's done is there's something for everyone to probably dislike'.
