UK business confidence has reached its lowest point in a year, driven by looming uncertainties around the upcoming Autumn Budget.
- The Institute of Chartered Accountants in England and Wales reports a significant drop in business confidence from Q2 to Q3 2024.
- Prime Minister Sir Keir Starmer’s warning of a ‘painful’ budget has heightened concerns among businesses.
- The Lloyds Bank Business Barometer shows business confidence at its lowest in three months, with broader economic unease pervasive.
- SMEs are particularly worried about potential fiscal challenges and tax hikes post-budget, with industries like energy, water, and mining most at risk.
The economic landscape in the UK is currently marked by a notable decline in business confidence, reaching its lowest level in a year as reported by the Institute of Chartered Accountants in England and Wales (ICAEW). The business confidence index fell from 16.7 in Q2 to 14.4 in Q3 2024, signaling growing concerns over fiscal challenges. This dip in confidence coincides with Prime Minister Sir Keir Starmer’s recent remarks about the impending ‘painful’ budget, which many fear could exacerbate existing economic pressures.
The latest data from the Lloyds Bank Business Barometer underscores this sentiment, illustrating a drop to 47% in September, marking the lowest level in three months. While individual businesses remain optimistic about their trading prospects, there is a prevailing apprehension regarding the UK’s overall economic direction. This suggests a dichotomy in confidence, where company-specific outlooks remain positive but are overshadowed by the broader economic uncertainties.
Small and medium-sized enterprises (SMEs) are particularly apprehensive about the upcoming fiscal adjustments, with Prism’s SME Barometer indicating that 75% of SMEs express concern over political instability affecting their operations. Furthermore, 78% of SMEs are worried about fiscal challenges following the budget, with potential tax increases being a primary concern. The issue of heavy tax burdens is seen as a significant growth barrier.
Different sectors are poised to experience varying levels of impact due to the anticipated fiscal measures. Resource-intensive sectors like energy, water, and mining are among the most vulnerable, due to their reliance on stable fiscal conditions and high fixed costs. Meanwhile, the property and retail sectors are also bracing for potential hikes in operating expenses resulting from tax or regulatory changes.
This downward trend in business confidence is particularly critical given the relative stability seen over the past year. Companies are already grappling with challenges such as inflation, labor shortages, and rising energy costs. The forthcoming Autumn Budget is perceived as a decisive moment that could either bolster or further deteriorate economic confidence, depending on the measures introduced.
The impending Autumn Budget presents a pivotal moment for UK businesses, with its outcomes likely to significantly influence future economic confidence.
