Business confidence in the UK has seen a decline, according to recent findings.
- The ICAEW survey indicates concerns over potential tax increases affecting business morale.
- Confidence dropped from 16.7 to 14.4 in the third quarter, reflecting widespread apprehension.
- Despite easing inflation, businesses are wary of investing amid speculation of tax hikes.
- Calls for reform and stability highlight the growing need for confidence restoration.
According to a recent survey by the Institute of Chartered Accountants in England and Wales (ICAEW), business confidence in the UK has declined as speculation about potential tax increases looms. This marks the first decline in confidence in over a year, as reflected in the drop from a score of 16.7 in the second quarter to 14.4 in the third quarter. The survey gathered responses from 1,000 professional advisers, revealing that 29% of respondents identified the ‘tax burden’ as a primary concern.
Alan Vallance, CEO of ICAEW, emphasized that businesses are notably troubled by the tax burden, impacting their willingness to invest strategically. He noted, ‘The findings show that businesses are troubled by the tax burden and increasingly reluctant to invest. As the UK prepares to host a major investment summit, and speculation mounts ahead of a difficult budget, the chancellor must give companies the certainty and stability they need.’ This need for stability is crucial as businesses worldwide observe the outcomes of upcoming economic policies.
Despite these concerns, the economy is experiencing some positive trends. Inflationary pressures have eased, allowing salary growth to slow slightly to 3.6% year-on-year, although it remains nearly double pre-pandemic levels. Domestic sales growth reached a yearly high of 3.8%, showing robust local market activity, even as export growth slowed to 2.7%, the lowest rate recorded for 2024.
Investment growth, however, presents a mixed picture, with an expected increase of just 1.9%, down from 2.1% in the previous quarter. Suren Thiru, Economics Director at ICAEW, commented that these developments signal a “slight reality check” for the UK economy. He stated, ‘Weaker expected export and investment activity, alongside fears of a painful budget, dented business confidence despite a boost from stronger domestic sales growth.’ This nuanced economic landscape highlights the complex factors at play in shaping future business confidence.
As the government prepares to announce its budget, there are growing calls from business leaders for reforms in VAT and business rates to foster long-term economic growth. These leaders are also advocating for enhanced private and public investments to bolster economic resilience and ensure sustained prosperity in the face of mounting fiscal challenges.
The current economic climate calls for strategic reforms and stability to restore business confidence.
