Is Rachel Reeves leading the UK to a spring crisis?

Rachel Reeves is sleepwalking into an economic catastrophe of her own making. Don’t expect a change of direction, says Matthew Lynn

Rachel Reeves, UK chancellor the exchequer, at the G-20 meeting
(Image credit: Dwayne Senior/Bloomberg via Getty Images)

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.

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

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

Sign up
Matthew Lynn

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.