British businesses are experiencing their bleakest outlook since former Prime Minister Liz Truss’s September 2022 “mini-budget,” according to a new survey by the British Chambers of Commerce (BCC). The drop in confidence follows significant tax increases announced in the Labour government’s October 30 budget.
The BCC survey, which is the largest private-sector study of British firms, found that business sentiment about taxation was the lowest since the organization began tracking it in 2017. Confidence in sales over the next year has also hit its lowest level since late 2022.
“The worrying reverberations of the budget are clear to see in our survey data,” said Shevaun Haviland, Director General of the BCC. “Business confidence has slumped in a pressure cooker of rising costs and taxes.”
Chancellor Rachel Reeves unveiled £40 billion ($50 billion) in tax hikes, the largest increase in any budget since 1993. The bulk of these measures include higher social security contributions for employers, sparking concerns about their impact on employment, prices, and investment.
While the Bank of England predicts that increased public spending will temporarily boost growth in 2025, policymakers are weighing whether the tax hikes will primarily lead to reduced profits, cutbacks in investments, or higher unemployment.
The BCC’s survey, conducted between November 11 and December 9 and involving 4,800 firms—most with fewer than 250 employees—highlighted troubling trends. Over half of the businesses surveyed (55%) planned to raise prices in response to the tax increases, a sharp rise from 39% in the previous quarter. Additionally, 24% of firms intend to reduce investment, up from 18% in the prior survey.
The pessimistic outlook mirrors other recent reports from S&P Global, the Institute of Directors, and the Confederation of British Industry.
The UK economy had shown signs of recovery in early 2024, rebounding from a shallow recession in late 2023. However, growth stagnated in the third quarter of 2024, and the Bank of England forecasts zero growth for the final quarter of the year. Modest growth of 1.5% is projected for 2025.
As businesses brace for the effects of increased taxation, the broader economic impact remains uncertain. The BCC plans to release further survey data on recruitment trends later this month, providing additional insights into how companies are navigating the challenging economic environment.
With the business community expressing growing dissatisfaction, the government faces mounting pressure to address their concerns and balance fiscal policies with economic growth.
