Rachel Reeves was dealt a further blow last night as figures showed business optimism had plummeted to its lowest level in four years.

The alarming data comes as Britain's Budget watchdog is today set to deliver its initial verdict on Labour's tax and spending plans ahead of a mini-Budget later this month.

An index that measures confidence across the British manufacturing industries – published by accountancy firm BDO – fell for the fifth consecutive month.

The figure tumbled to 91.4 – the lowest since January 2021 – from 92.2 in December. A reading of 100 is average, while a gauge below 95 is negative.

BDO's score of employers' sentiment towards staffing levels fell to levels reminiscent of the global financial crisis in 2008. And fears are mounting over growing unemployment as various sectors brace for a barrage of costs next month.

BDO said gloomy news about redundancies is set to continue throughout 2025 as businesses grapple with higher taxes.

Labour's plan to hike National Insurance contributions and impose an inflation-busting minimum wage rise from April, combined with business rate increases, has sent confidence plummeting while threatening jobs and pushing up prices.

BDO partner Kaley Crossthwaite said businesses 'need continued support' to achieve growth while interest rate cuts slowly benefit the economy.

High Street chains will also be walloped by rate increases, with the slashing of Covid-era relief amounting to an extra £1billion bill, says global tax firm Ryan.

The stark figures precede the Office for Budget Responsibility's forecast – which will not be made public ahead of Reeves's Spring Statement on March 26.

Yesterday's index score hands the Chancellor the watchdog's first take on whether she has done enough to fill the black hole in the public finances.

Reeves is thought to have submitted plans to the OBR for billions of pounds worth of spending cuts. Reports suggest they will focus on slashing the towering welfare bill.

This week also sees the final official figures on the UK's growth before the mini-Budget. Gross domestic product grew by 0.4 per cent in December.