Business confidence in the UK has taken a sharp downturn, recording its first decline in a year, as concerns mount over Chancellor Rachel Reeves’ forthcoming Autumn Budget.
The latest economic data, alongside insights from the upcoming SME Barometer brought to you by Prism, highlights growing apprehension among businesses, with many fearing significant fiscal challenges ahead.
The Institute of Chartered Accountants in England and Wales (ICAEW) reports that business confidence dropped to 14.4 in Q3 2024, down from 16.7 in Q2. This decline marks a significant shift in sentiment as slow business growth and a deteriorating economic outlook begin to take hold. Prime Minister Sir Keir Starmer’s recent warning that the upcoming budget “will be painful” has only exacerbated these concerns.
Declining business confidence
The latest Lloyds Bank Business Barometer shows that business confidence fell to 47% in September, its lowest level in three months. While companies remain optimistic about their own trading prospects, there is widespread unease about the broader economic landscape. This suggests that while businesses may feel secure in their individual operations, they are losing faith in the UK’s overall economic direction.
SME concerns ahead of the budget
Prism’s forthcoming SME Barometer reveals a troubling outlook for small and medium-sized enterprises (SMEs). The data shows that:
– 75% of SMEs express concern that political uncertainty could negatively impact their business.
– 78% are worried about post-budget fiscal challenges, with fears of tax increases at the forefront.
The tax burden is emerging as a major issue, with 29% of businesses citing it as a significant barrier to growth. ICAEW data indicates that the sectors most concerned include energy, water, and mining (44%), property (38%), and retail and wholesale (32%).
Sectoral variations in concern
The differing levels of concern across industries highlight the uneven impact of potential fiscal measures. Resource-intensive sectors, such as energy and mining, are particularly vulnerable to changes in the tax regime due to their high fixed costs and reliance on stable fiscal conditions. Property and retail businesses are also feeling the pressure, as they brace for potential increases in operating expenses due to tax hikes or regulatory changes.
A turning point for the UK economy
The drop in business confidence is particularly significant given the relative stability over the past year. This shift comes at a critical moment for the UK economy, as companies face ongoing challenges such as inflation, labour shortages, and rising energy costs. The looming Autumn Budget is seen as a pivotal moment that could either restore confidence or further erode it, depending on the measures announced.
Read more:
UK business confidence hits twelve-month low as Autumn Budget looms
