Businesses have cut back on hiring to the lowest level since the pandemic as bosses fear the prospect of tax raids by Rachel Reeves in the Budget later this month.

The share of companies trying to recruit new workers has dropped to 56pc, according to the British Chambers of Commerce, the smallest share since the second quarter of 2021, when the country was still in the grip of Covid restrictions.

It comes amid fears of tax raids on capital gains and on employers’ national insurance by the Chancellor, as well as proposals to boost workers’ rights.

Transport, hospitality and construction businesses are still keen to take on staff, the survey found, but most companies in retail, professional services and communications businesses have suspended hiring.

Jane Gratton at the business group said a growing share of companies are “holding back on hiring”.

“There’s considerable uncertainty for business right now. They are concerned about potential tax rises heading their way in the budget. They’re also worried that changes to employment rights might increase costs and complexity,” she said.

“The government needs to drive growth and ensure there’s no drop in momentum.  The upcoming budget is a golden opportunity to give firms reason to be optimistic.”

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