Boris Johnson drama risks tipping UK into recession, CBI suggests

CBI boss warns ‘a summer of politics like we’ve had in the last week... will undermine confidence. “

Philip Hammond says 'the writing is on the wall' for Boris Johnson

Business leaders have warned Boris Johnson that the crisis engulfing his government risks undermining business confidence and potentially tipping the UK into recession.

Tony Danker, the director-general of the Confederation of British Industry (CBI), said he thought the UK could still avoid entering a recession in the coming months.

But he warned: “There’s a very simple chain of events, which is when business confidence is high, businesses invest and grow, recession is avoided.

“When business confidence falls, investment falls, and it is the only thing at the moment stopping us from recession. So anything that can be done to boost business confidence, to demonstrate that actually the government is incredibly serious and purposeful about growth will work. But if we have a summer of politics like we’ve had in the last week, that will undermine confidence.”

The prime minister declared that economic growth was his top priority as he sought to relaunch his government after four in 10 of his own MPs voted to oust him from Downing Street last week.

Mr Johnson is also facing a growing clamour from Conservative MPs to announce large-scale tax cuts, following complaints his administration is not conservative enough.

But Mr Danker also warned that “massive” tax cuts, or huge pay settlements, would “overheat” the economy.

Northern Ireland secretary Brandon Lewis said he would support bringing forward the chancellor’s planned income tax cut “when we can afford to do it”.

The 1p cut has been pledged in 2024 but many Tory MPs fear the party cannot afford to leave it that long.

The CBI has downgraded its outlook for economic growth and called on the prime minister and chancellor to take the "vital” steps to avoid a recession, including holding a Cobra meeting of the kind usually reserved for things like terrorist incidents.

The group also believes inflation will remain high into the autumn, leading to a “historic squeeze” in household incomes and hitting consumer spending.

Labour would scrap the recent national insurance rise “right now” if it were in government rather than focusing on income tax cuts, the shadow chancellor Rachel Reeves said.

“The thing that we should be doing right now is reversing that national insurance increase,” she told the BBC’s Sunday Morning show. “That would be my priority if I was chancellor today because it is taking money out of people’s pockets.”

She added: “The government have got this sort of hokey-cokey where they are increasing national insurance but say they are going to reduce income tax.

“National insurance is a tax only on the income that you get through going out to work, that is why it is such a damaging tax increase right in the middle of a cost of living crisis.”

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