The UK economy faces a “massive hit” in 2023 because Rishi Sunak’s government is refusing point blank to negotiate with unions over ending public sector strikes, shadow chancellor Rachel Reeves has told the Observer in a marked escalation of rhetoric from Labour. This week will see five consecutive days of shutdowns on the rail system but Reeves says ministers appear to have “given up” on governing altogether and are instead seeking confrontation with the unions for political reasons. “The Tories’ approach is increasingly reckless in allowing these strikes to continue with no effort to resolve them,” she said. “We need trains that run, ambulances that arrive and hospital beds available in a functioning economy and society. Under the Tories we barely have any. And our economy is not going to get back to growth when people can’t get to work or to restaurants, pubs and theatres. Sitting on the sidelines is now just another way in which the Tories are sabotaging the UK economy.” The remarks by Reeves will be seen as more clearly supportive of the unions’ and public sector’s cause than Labour has been to date. Party sources say that if and when Labour comes to power there will be a “reset” to ensure that public sector pay keeps pace with inflation and that vocational jobs such as nursing are truly valued. Describing the refusal to discuss pay with the unions as a “total abdication of responsibility”, Reeves said: “The fact that Tories are happier to see a massive hit to the economy and prolonged chaos and misery than sit in a room with ordinary working people and negotiate with their representatives is unforgivable. “These disputes will be resolved only by negotiating fair pay deals with compromise from all sides. The government has refused to resolve disputes, because the Tory party is so hopelessly divided on everything else that confronting trade unions is the only thing left to unite their MPs.” Increasingly, business leaders are also concerned at huge additional damage to the economy if strikes continue, warning that businesses are being “hammered”. Jane Gratton, head of people policy at the British Chambers of Commerce, said strikes would be a disaster for firms that rely on extra takings in the festive season to see them through January and February. “Getting people to negotiate has to be the top priority,” she said. “Where this can’t happen, a basic level of service must be maintained to allow the wider business community to continue to operate.” Richard Burge, chief executive of the London Chamber of Commerce and Industry, said: “Businesses across the UK, and especially those in the capital, are being hammered by these bouts of strikes. Many of the hardest hit are small firms which employ the majority of people across the country. Ongoing strikes impacting on everyday business operations may be the final straw for some.” Paul Johnson, director of the Institute for Fiscal Studies, said the government and unions were locked in “a classic standoff”, with ministers fearing a rash of pay demands if they offer more money to any single sector, such as nurses, while the unions are determined to show their value to their members. In his new year message, Labour leader Keir Starmer said his party would continue to make the case for a “new Britain” that would fix struggling public services and “grow the economy for everyone”. Downing Street said the prime minister’s priorities would include cutting NHS waiting lists, reducing illegal immigration, addressing the cost of living crisis by keeping inflation under control, and increasing the UK’s energy security. Kate Nicholls, chief executive of UKHospitality, has described the financial impact of train strikes on the sector as worse than expected, resulting in a “perfect storm” for businesses facing rising energy bills and inflation that will undoubtedly mean more business failures in the next three months. “The strikes will delay the return to work and city centre recovery,” she said. “The message from the rail companies, the unions and the government is ‘don’t come into work, work from home’. Our sector is collateral damage in the fallout from such a long running protracted strike. Enough is enough.” The Office for National Statistics has reported that retail sales in the UK fell by an estimated 0.4% in November, the most recent figures available. Strikes in December have also significantly hit footfall on high streets and in shopping centres. Andrew Goodacre, chief executive of the British Independent Retailers Association, said: “The strikes currently having the most impact on retail are the train strikes. The negative impact is very noticeable in the large city centres, where footfall has dropped, and consequently consumer expenditure has fallen.” A Conservative spokesperson said: ‘The Labour party continuously fail to put forward a credible plan to tackle the issues we face. We are doing all we can to mitigate the impact but Labour should call on union bosses to be reasonable, stay around the negotiating table and call off these damaging strikes.” Ministers have said they have accepted the recommendations of the NHS pay review body, but there was not a “bottomless pit” of money to meet union demands.