Chancellor Jeremy Hunt may have calmed the markets by reversing his predecessor’s tax cuts, but he has upset some business leaders who had welcomed many of Kwasi Kwarteng’s measures.

Some are concerned that by ditching almost the entire Kwarteng-Truss package Mr Hunt is throwing out the baby with the bath water and that he should have retained more of the positive measures designed to help businesses get through the winter and beyond.

On the plus side, Mr Hunt will go-ahead with scrapping the national insurance increase and will cut Stamp Duty Land Tax (in England). The £1 million annual investment allowance, the Seed Enterprise Investment Scheme and the company share options plan will also continue.

But a number of other “popular” tax changes Mr Kwarteng had proposed have now been ditched. As well as pressing ahead with a rise in corporation tax from 19% to 25%, Mr Hunt will go ahead with raising alcohol duties that will add to other cost of living increases and potentially put more pubs and hospitality firms out of business.

Goldman Sachs warned that the rise in corporation tax would result in a “more significant recession” in the UK than previously expected. The investment bank said it expects the economy to shrink by 1% next year, down from its previous forecast of a 0.4% decline. 

Even after the chancellor’s announcements, and the fall in government yields, banks continued to increase the cost of borrowing.

Shevaun Haviland, director general of the British Chambers of Commerce, said:  “The Chancellor’s buzzword was stability. But what we’ve seen from him is a plan for today and nothing for tomorrow.  

“Following the economic turmoil of the last few weeks he had to press the reset button.  But businesses will be dismayed by the decision that looks set to strip back the energy support for firms from next April. This will be a hammer blow for many who were already worried about how they will survive.”

The decision to reinstate the reforms to the unpopular IR35 off-payroll rules on contractors is a particularly unwelcome reversal as the rules are regarded as unfair and too complicated.

Dave Chaplin, CEO of tax compliance firm IR35 Shield, said: “The Conservatives U-turn on the repeal has thrown around half of the genuinely self-employed contractors under the bus, and likely kissed goodbye to their success at the next General Election.

“It appears the pro-growth Conservatives have now joined the Anti-Growth Coalition.”

On the decision to drop the alcohol duties freeze, Mark Kent, chief executive of the Scotch Whisky Association, said: “Business can only work on the basis of certainty and stability. 

“That has been stripped from the Scotch Whisky industry following the Chancellor’s decision to u-turn on the duty freeze for Scotch Whisky announced just over two weeks ago. 

“With the average-priced bottle of Scotch Whisky already taxed at 70%, a double-digit rise in spirits duty will now seriously reduce the industry’s ability to support the UK economy through investment, job creation and rising revenue to the Treasury. 

“It will add to pressures in the UK hospitality industry and household budgets as costs inevitably increase.”

Emma McClarkin, chief executive of the British Beer and Pub Association (BBPA), said: “The freeze would have delivered a £300 million saving to our industry at a time when we desperately need any relief we can get, to help to keep a lid on spiralling costs and keep the price of pint affordable for pub goers this winter. 

“The cost of doing business is completely out of control for pubs and brewers and the failure to act today to reduce pressures on businesses will hit them extremely hard.”

The Chancellor also dropped the plan to reinstate VAT-free shopping for tourists, another of Mr Kwarteng’s measures which had been welcomed by businesses.

Chris Sanger, EY’s head of tax policy, described the Chancellor’s move as “surprising”.

He said: “Designed to be a measure to attract travellers to the UK and boost spending both at ports and high streets, this could have provided a welcome boost to the economy. This might be something that the Chancellor returns to in the future.”

The £32bn package of tax hikes was welcomed by investors with the pound rising and government borrowing costs falling.