Business confidence in the UK has fallen sharply, recording its first decline in a year, as concerns grow over Chancellor Rachel Reeves’ upcoming autumn budget.
The latest economic data, along with insights from the upcoming SME Barometer brought to you by Prism, highlight growing concerns among businesses, with many fearing significant financial challenges ahead.
The Institute of Chartered Accountants in England and Wales (ICAEW) reported that business confidence fell to 14.4 in the third quarter of 2024, down from 16.7 in the second quarter. This decline represents a significant shift in sentiment as business growth begins to slow and the economic outlook deteriorates. Prime Minister Sir Keir Starmer’s recent warning that the upcoming Budget “will be painful” has exacerbated these concerns.
Declining confidence in business
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 business prospects, there is widespread concern about the broader economic landscape. This suggests that although businesses may feel secure in their individual operations, they are losing confidence in the UK’s overall economic direction.
SME concerns ahead of budget
The upcoming PRISM SME Barometer reveals a worrying outlook for SMEs. The data shows that:
– 75% of small and medium-sized companies express concern that political uncertainty may negatively affect their business.
– 78% are concerned about financial challenges after the budget, primarily fears of increasing taxes.
The tax burden emerges as a major issue, with 29% of businesses citing it as a major impediment to growth. ICAEW data indicates that the most interested sectors include energy, water and mining (44%), real estate (38%), and retail and wholesale trade (32%).
Sectional differences in anxiety
The varying 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 system due to their high fixed costs and dependence on stable financial conditions. Real estate and retail companies are also feeling the pressure, as they prepare for potential increases in operating expenses due to increased taxes or regulatory changes.
A turning point for the UK economy
The decline in business confidence is particularly significant given the relative stability over the past year. The shift comes at a critical moment for the UK economy, with businesses facing ongoing challenges such as inflation, labor shortages and rising energy costs. The looming autumn budget is seen as a pivotal moment that could restore confidence or erode it further, depending on the measures announced.
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