Corporate travel leaders have been warned the UK economy will be hit by “Storm Rachel” at the beginning of April.
Leading economic commentator Liam Halligan told a joint conference of the Business Travel Association and Advantage Global Business Travel in London last week that the economy already looks to be contracting ahead of sharp increases in employers’ National Insurance Contributions (NICs) next month.
He also warned that a US-led tariff war could be “of seismic historic importance” and make everyone “a lot worse off”.
Halligan told the conference: “The world is at an inflection point.”
He pointed out prime minister Keir Starmer “inherited an economy with debt at 100% of GDP and only growing 0.8%” and said: “It wasn’t a golden inheritance. Since then, it has got worse.
“Tax was already at a 70-year high as a proportion of GDP, then the Budget tax rises were announced on top of that. “
Just news of these meant the economy flatlined. Hiring is falling at the steepest rate at any time since the pandemic. Manufacturing is at a particularly low ebb.
“The UK has stalled as business leaders decided this is not a good environment.”
Halligan noted UK national debt had “ballooned in the austerity years” and the interest rate on borrowing “is really high compared to three to four years ago” and said: “The government spends more on servicing debt than it does on education, more than £100 billion a year. “
He argued: “The Tories left a real mess. This government faces a really challenging economic environment.”
Recent economic data “suggests the economy is contracting”, he added, and warned: “A recession becomes a self-fulfilling prophesy.”
The rate of employers’ National Insurance Contributions (NICs) will rise to 15% from April, but Halligan argued: “The threshold being lowered is the real killer. Lower paid employees will be much more expensive. The beginning of April will be ‘Storm Rachel’.
NICs will have to be paid on salaries of £5,000 a year from April 6, down from £9,100 at present.
However, Halligan warned the developing tariff war, with the US imposing tariffs on Mexico, Canada and China and threatening tariffs on the EU, could prove even more damaging to the economy.
He said: “These tariffs are potentially of seismic historic importance.
“The US introduced tariffs in the 1930s and turned the Wall Street Crash into a global depression. These tariffs will probably lead to inflation in the US which will probably be exported around the world.
“Trump can push Mexico and Canada around, but he can’t push China around. People in our security services are worried Trump will push too hard and it will lead to a much less stable environment.
“We’re going to be a lot worse off if there are big tariffs.”