Is Rachel Reeves leading the UK to a spring crisis?

Rachel Reeves, UK chancellor the exchequer, at the G-20 meeting

(Image credit: Dwayne Senior/Bloomberg via Getty Images)

published 28 February 2025

Growth has stagnated and is falling on a per capita basis. Job vacancies are in free fall. Inflation is rising again, making it harder for the Bank of England to cut interest rates, and taxes are still going up. You might think the state of the British economy could not get much worse. You would be wrong. In The Waste Land, T.S. Eliot says that “April is the cruellest month”. It certainly looks like it will be for chancellor Rachel Reeves.

Companies face four blows. First, the rise in employers’ national insurance (NI) will come into effect. We have already seen a sharp fall in job vacancies, and plenty of big companies have said they will have to make redundancies to cope with the extra tax. And that is before it has even come into effect. Once the extra bill has to be paid, we will see the real impact, especially on small businesses. A few will close because they can’t afford it, others will have to fire a few people, many more will stop hiring.

Second, the huge rise in stamp duty. Property website Zoopla reported that, once the 2% rate between £125,000 and £250,000 comes back in April, the number of transactions hit by stamp duty will rise from 49% to 83%. That will raise an extra £1.1 billion for the Treasury. But it will also mean a big rise in costs, especially for first-time buyers who typically buy less expensive homes. The result? A slowdown in the property market and for all the businesses and trades that depend on it.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Third, business rates relief for pubs and other hospitality businesses will come to an end. Many of them were already in bad shape. The British Beer and Pub Association says six pubs closed every week last year, while accountant Bailey Price estimates one in ten restaurants are likely to close over the coming year. When rate relief drops from 75% to 40% in April, such businesses will face a huge rise in the tax they have to pay for their premises, and it is levied regardless of whether they are making money or not. Put together with the NI rise, and given that you can’t run a pub without staff, the rate of closures will inevitably accelerate.

A more competent chancellor would be doing something about all this. She could soften the impact of the NI rise, for example, by having it phased in, as many of the major retailers have asked for. She could reform business rates, so that firms only had to pay it when they making profits. The old, simpler system of a single low rate of stamp duty would be less of a barrier to a healthy property market. And she could start making cuts to government spending to lift the threat of yet more tax rises. Instead, Reeves appears to be charging straight for the cliff edge. The result? There will be a spring catastrophe for the economy – and one that is already completely foreseeable.

Matthew Lynn is a columnist for Bloomberg, and writes weekly commentary syndicated in papers such as the Daily Telegraph, Die Welt, the Sydney Morning Herald, the South China Morning Post and the Miami Herald. He is also an associate editor of Spectator Business, and a regular contributor to The Spectator. Before that, he worked for the business section of the Sunday Times for ten years.

He has written books on finance and financial topics, including Bust: Greece, The Euro and The Sovereign Debt Crisis and The Long Depression: The Slump of 2008 to 2031. Matthew is also the author of the Death Force series of military thrillers and the founder of Lume Books, an independent publisher.