(Bloomberg) -- UK business confidence has dropped to its lowest level since former Conservative Prime Minister Liz Truss’s disastrous mini-budget more than two years ago, according to a survey by the British Chambers of Commerce that echoes concerns over the current Labour government’s tax hikes.
A majority of firms expect prices to increase over the next three months as companies pass on higher taxes and another jump in the minimum wage, unveiled by Chancellor of the Exchequer Rachel Reeves in her October budget. Business conditions are “weak,” the lobby group added, and more firms slowed investment than accelerated it over the past three months.
The findings in the BCC’s Quarterly Economic Survey will make uncomfortable reading for Reeves, who hopes business will turbocharge growth by stepping up investment. The economy has stagnated since Labour’s landslide election victory in July amid a backlash against the £40 billion ($49.6 billion) of budget tax rises, including a £26 billion increase in the national insurance payroll levy on employers.
Borrowing costs have also risen on concerns that inflation will prove more sticky.
“The worrying reverberations of the budget are clear to see in our survey data,” said Shevaun Haviland, director general of the BCC. “Businesses confidence has slumped in a pressure cooker of rising costs and taxes.”
The survey, which the BCC said was “the largest poll of business sentiment since the budget,” found that 63% of firms are now worried about tax, the highest reading since records began in 2017. Business confidence has “declined significantly,” with only 49% expecting turnover to increase in the coming year, the lowest level since Autumn 2022 in the aftermath of Truss’s mini-budget and down from 56% before the budget.
Inflation
Over half of companies, 55%, said they would recover costs by raising prices in the next quarter, a sharp increase from the 39% that planned price increases before October. Only 2% of companies said they would cut their prices, raising fresh fears that inflation may rebound.
“Firms of all shapes and sizes are telling us the national insurance hike is particularly damaging. Businesses are already cutting back on investment and say they will have to put up prices in the coming months,” Haviland said.
A separate survey from the Federation of Small Businesses found that two-thirds of companies would hire fewer staff, given concerns about Labour’s plans to bolster workers’ rights. Nearly one-third said they would cut jobs. The FSB said it was particularly worried about proposals for workers to have the power to take an employer to tribunal from the first day in a new job.
(Updates with FSB survey in final paragraph.)
©2025 Bloomberg L.P.