Business leaders have warned Boris Johnson that the crisis engulfing his government risks undermining business confidence and potentially pushing the UK into recession.
Tony Dunker, CEO of the CBI, said he believed the UK could still avoid a recession in the coming months.
But he warned: “There is a very simple chain of events, which is when business confidence is high, business invests and grows, the recession is avoided.
“When business confidence falls, investment falls, and that’s the only thing stopping us from the recession right now. So anything that can be done to boost business confidence to demonstrate that the government is actually incredibly serious and focused on growth will work. But if we have a summer of politics like we had last week, it will undermine confidence. “
The prime minister said economic growth was his top priority as he sought to rebuild his government after 4 out of 10 of his own lawmakers voted to oust him from Downing Street last week.
Mr Johnson is also facing growing noise from Tory MPs announcing large-scale tax breaks after complaining that his administration is not conservative enough.
But Mr Dunker also warned that “massive” tax breaks or huge wage settlements would “overheat” the economy.
NI Secretary-General Brandon Lewis said he would support proposing the Chancellor’s planned income tax cuts “when we can afford to do so.”
A 1-pound cut has been promised in 2024, but many Tory MPs fear the party cannot afford to leave for so long.
The CBI has lowered its economic growth prospects and called on the prime minister and chancellor to take “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 that inflation will remain high in the autumn, which will lead to a “historic contraction” in household incomes and hit consumer spending.
Labor would have removed the recent increase in national security “right now” if it had been in government instead of focusing on income tax cuts, shadow Chancellor Rachel Reeves said.
She told the BBC’s Sunday Morning: “The thing we need to do right now is reverse this increase in national insurance.
“It would be my priority if I were chancellor today, because it takes money out of people’s pockets.
She added: “The government has this type of hockey, where they increase national insurance, but say they will reduce the income tax.
“National insurance is a tax only on the income you receive when you go to work, which is why it is such a harmful tax increase right in the middle of the cost of living crisis.”
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