UK business confidence has fallen to the lowest level for more than two years amid growing concern over tax rises and Donald Trump’s escalating trade war, according to a survey.
Highlighting the risks to the economy, the Institute of Chartered Accountants in England and Wales (ICAEW) said the first quarter of the year had been “harrowing” for companies across Britain.
The industry body for the accountancy profession said its survey of 1,000 chartered accountants found a sharp drop in business confidence, fuelled by record high tax worries, rising cost pressures and slowing sales expectations.
Its index of business confidence fell to -3, the weakest reading since the fourth quarter of 2022, and down from 0.2 in the final three months of 2024. A reading of 100 on the index would show all survey respondents were very much confident about future prospects, while a -100 would represent the opposite.
Suren Thiru, the economics director at the ICAEW, said: “These figures suggest that this year has so far been a pretty harrowing one for the UK economy as accelerating anxiety over future sales performance, April’s eye-watering tax hike and US tariffs helped push business sentiment into ominous territory.”
Britain’s economy outpaced expectations in February, according to official figures published last week, with growth of 0.5% as businesses and consumers continued to spend despite an increasingly gloomy backdrop.
Business surveys had indicated that employers were shedding jobs at one of the fastest rates since the 2008 financial crisis, but official data has shown a much more resilient picture. The latest job market figures are due on Tuesday, while inflation figures are expected on Wednesday.
However, concerns are growing over the impact of Rachel Reeves’s increase in employer national insurance contributions (Nics) announced in her £40bn tax-raising autumn budget, which came into effect on 6 April.
The blowback from Trump’s global trade war is also expected to hit Britain’s economy. The National Institute of Economic and Social Research has warned that high US tariffs could knock UK GDP growth close to zero next year.
According to the ICAEW, more than half of businesses (56%) in the poll said tax increases were a growing challenge, a new record for the survey which first began in 2004. Weaker economic conditions also meant businesses expected domestic sales growth in the year ahead to drop to the lowest level since the third quarter of 2022.
It comes as financial markets predict that the increasingly gloomy economic outlook should cement a Bank of England interest rate cut at its next policy meeting on 8 May, despite inflation lingering above its 2% target.
“The mood music on the economy is turning increasingly sour and with forward-looking indicators of sales and employment activity weakening, things may get worse before they get better,” Thiru said.
Source: theguardian.com
