UK business confidence has fallen to its lowest level in over two years, according to new data from the Institute of Chartered Accountants in England and Wales (ICAEW), as rising tax pressures and escalating global trade tensions take their toll on corporate sentiment.
In its latest quarterly survey of 1,000 chartered accountants, the ICAEW reported that its Business Confidence Index dropped to -3 for the first quarter of 2025—down from 0.2 in the final quarter of last year, and the weakest reading since late 2022. The findings reflect mounting anxiety over operating costs, slowing sales, and the economic fallout from President Donald Trump’s tariff-led trade war.
“These figures suggest that this year has so far been a pretty harrowing one for the UK economy,” said Suren Thiru, Economics Director at the ICAEW. “Accelerating anxiety over future sales performance, April’s eye-watering tax hike and US tariffs helped push business sentiment into ominous territory.”
The survey revealed a significant shift in business priorities, with 56 per cent of respondents citing rising taxes—particularly the increase in employer National Insurance contributions (NICs) introduced by Chancellor Rachel Reeves—as a growing concern. That marks the highest level of tax-related anxiety recorded since the survey began in 2004.
Reeves’s £40 billion tax-raising Autumn Budget, which came into force on 6 April, has fuelled fears that increased costs will curb investment, hiring and consumer confidence.
Trade tensions and policy uncertainty weigh on outlook
Businesses are also growing increasingly uneasy about the wider global context. Trump’s latest round of tariffs, introduced in March, have raised concerns that products destined for the US may be redirected to markets like the UK, undercutting domestic suppliers and denting exports. Analysts warn that such trade disruptions could drag UK GDP growth close to zero in the coming year, according to the National Institute of Economic and Social Research (NIESR).
Although the UK economy surprised on the upside in February with 0.5 per cent monthly growth, official data shows resilience in consumer and business spending despite the bleak outlook from forward-looking surveys. However, employment indicators are flashing red, with some surveys suggesting job losses at the fastest rate since the 2008 financial crisis—even though official labour market data has so far presented a more stable picture. The next set of jobs data is due on Tuesday, followed by inflation figures on Wednesday.
Businesses are also scaling back expectations for domestic growth, with sales forecasts now at their weakest since Q3 2022. This slowing momentum, combined with persistent cost pressures, is expected to intensify calls for the Bank of England to act. Many in the market now anticipate a rate cut on 8 May, despite inflation still hovering above the Bank’s 2 per cent target.
“The mood music on the economy is turning increasingly sour,” added Thiru. “With forward-looking indicators of sales and employment activity weakening, things may get worse before they get better.”
As businesses continue to grapple with rising overheads and external shocks, confidence will likely remain fragile—placing even greater importance on policy clarity, fiscal support and trade stability in the months ahead.
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UK business confidence sinks to two-year low amid tax hikes and global trade tensions
