If the Chancellor does not understand that business owners and investors can simply choose to stop, Britain won’t simply crash – it will stagnate, writes Claire Madden.
Something fundamental is shifting in the UK private sector. Not through collapse or crisis, but through a quieter and more damaging trend: entrepreneurs who once drove growth are now choosing not to. Governments still behave as if businesses will invest, hire and expand regardless of conditions, yet the rise in employer National Insurance shows how easily policy can erode that willingness. At Connection Capital, our day-to-day experience confirms what policymakers often miss: the UK economy is not powered by large PLCs that can absorb uncertainty. It is built on small and medium enterprises that employ millions, generate tax revenues and account for nearly all private sector firms. If those owners decide growth is no longer worth the risk, the economy does not adapt. It flatlines.
That risk is now very real, because the current environment is uncertain by design. Rachel Reeves has chosen the latest possible date for her Budget, and is reticent to explain how she will reconcile rising expenditure with her promise not to raise income tax, VAT or employer NI. If she ruled out those increases while setting out a convincing plan for growth, confidence might improve. Instead, she offers no detail on spending restraint and points only to incremental regulatory and tax changes that raise costs without creating opportunity. The Workers Rights Bill may be well intentioned, but layered on top of labour taxes, frozen thresholds and rising wage costs, it becomes another reason to pause hiring rather than expand it.
None of this uncertainty is abstract. It shows up in behaviour. Companies are putting hiring rounds on ice. Investment committees are delaying capital deployment. Individuals with capital to invest are holding back not because they are uncooperative, but because they do not know what kind of economy they will be investing into. When policy direction is unclear, rational people wait for clarity.
Given that private equity and venture-backed companies already support more than 2.5 million jobs and contribute over £190 billion a year to UK GDP, why would any serious government risk choking off that engine through uncertainty?
The consequences are visible. Unemployment has risen every month since Reeves delivered her first Budget1, and graduate recruitment pipelines are shrinking across multiple sectors. Many SMEs are quietly freezing roles or reducing headcount. Given that private equity and venture-backed companies already support more than 2.5 million jobs and contribute over £190 billion a year to UK GDP2, why would any serious government risk choking off that engine through uncertainty? These are not the actions of an economy preparing to grow.
The frustration is that alternatives exist. A reversal of the employers’ National Insurance increase would reduce the cost of every new hire. A VAT cut for small businesses would improve margins and free up cash for investment. A meaningful reduction in business rates would lower the burden on the very companies expected to deliver jobs and productivity. None of these ideas have been ruled out because they are unaffordable. They are simply not being prioritised. Instead, the Chancellor has created a vacuum in which speculation replaces certainty.
Meanwhile, capital is still available. Connection Capital’s latest investor survey, conducted in June 2025, shows that 75% of clients plan to maintain or increase their private equity allocations over the next year3. There is no absence of cash or willingness to take risk. What is missing is confidence that risk will be rewarded, not penalised. Investors are not being obstinate. They are behaving exactly as any entrepreneur would when confronted with unclear rules: they are waiting.
Reeves’ calculation appears to be that she can manage this uncertainty until after the Budget and then reveal a solution without having to break manifesto promises or confront her backbenches. It may buy her a bit of time, particularly while bond markets remain calm, but it would be an error to confuse market patience with approval. If confidence breaks, capital leaves far faster than it arrives, and credibility is far harder to rebuild than to maintain.
This is the core misunderstanding. A government comprised of individuals with no private sector experience may assume business owners will invest regardless. They will not. They will wait until the environment makes sense. And the longer they wait, the more growth slips from realistic ambition to political slogan.
Private capital is ready. Entrepreneurs remain willing. What they lack is faith that policy will reward their efforts rather than punish them. If Britain really wants growth, it must prove that risk is worth taking. Because if the people who drive the economy conclude that standing still is safer than stepping forward, the growth debate ends before it begins.
Sources
- Office for National Statistics, UK Labour Market Overview, November 2025.
- BVCA, Private capital investment into UK business tops £29bn in 2024.
- Connection Capital, "Alternative thinking" whitepaper, 2025.