Business confidence hits ‘record low’ as Reeves slammed over taxes
Business directors’ confidence in the UK economy has plunged to an all-time low, with firms unconvinced by Chancellor Rachel Reeves’ growth-focussed policies as the impact of last year’s tax hikes continues to play out.
Keir Starmer has repeatedly told MPs business confidence is at a nine-year high, pointing to a single business survey put together by Lloyds Bank.
But fresh data by the Institute of Directors, which boasts some 20,000 members, suggested UK firms were far less optimistic about the UK economy’s prospects and about their own organisations.
A survey of directors at 639 businesses suggested the net balance for pessimism had deepened by 19 percentage points in July compared to the month before.
Confidence in business prospects also fell into negative territory after more positive data in June, making leaders’ confidence in their own organisations last month the second lowest reading since the introduction of the indicator in mid-2016.
Export expectations also fell into negative numbers after the UK’s trade deals with the US and EU provided some short-lived hopes for businesses across the country in the previous .
Firms also signalled their worries about higher costs hitting profit margins while, in more concerning news for the UK jobs market, more firms became pessimistic about headcount expectations.
IoD chief economist Anna Leach said UK business leaders were battling with immediate cost increases introduced by Rachel Reeves’ brutal £20bn tax raid on employment last autumn while improvements on rules and funding had been “slower”.
“Last year, damaging speculation around tax rises in the lead-up to the 2024 Budget caused many firms to pause investment and hiring decisions, contributing to six months of near-zero economic growth,” Leach said,
“We’re now living with the economic consequences of those tax hikes, even as uncertainty around future costs once again builds.
“With ripple effects through the economy from tax changes and signs of consumer retrenchment, many firms report that they are struggling to plan amid a cacophony of risk.
“The government must urgently quash rumours of further tax rises for business this autumn, and accelerate planning reforms and de-regulation to restore confidence and drive growth.”
Rachel Reeves’ growth policies less important than taxation
A separate IoD survey which yielded nearly 900 responses suggested that just nine per cent of business owners believed government policy so far would be successful in driving growth.
The top area in which businesses wanted to see “government action” was in taxation, reducing the cost of employment and slashing red tape.
The latest business survey contradicts more positive readings on business confidence in research by Lloyds Bank, which is widely seen as an outlier among leading economists and focuses on sentiment among businesses with turnover higher than £250,000.
Another business indicator this week suggested negative sentiment had now lasted 10 months in signs UK firms have not been persuaded by the government’s industrial strategy and deregulation announced under the Leeds Reforms.
Shadow business secretary Andrew Griffith said gloomy results in the IoD’s survey did not come as a surprise given Labour had “spent the last year attacking private enterprise with the zeal of a left-wing student union”.
“A year ago businesses faced a summer of uncertainty followed by massive tax hikes. Like a bad horror move franchise, the Chancellor seems determined to release a sequel,” Griffith said.