UK business confidence has plummeted to its lowest level in over two years, driven by escalating tax pressures and global trade tensions. A recent survey by the Institute of Chartered Accountants in England and Wales (ICAEW) reveals a significant decline in corporate sentiment, reflecting the challenges faced by businesses in the current economic climate.
Key takeaways
- Business Confidence Index drops to -3, the lowest since late 2022.
- 56% of businesses cite rising taxes as a major concern, a record high.
- Concerns over US tariffs are contributing to a pessimistic outlook for sales and growth.
Decline in business confidence
The ICAEW’s latest quarterly survey, which included responses from 1,000 chartered accountants, reported a Business Confidence Index of -3 for the first quarter of 2025, down from 0.2 in the previous quarter. This marks the weakest reading since the final quarter of 2022, indicating a worrying trend for the UK economy.
Suren Thiru, Economics Director at the ICAEW, commented, "These figures suggest that this year has so far been a pretty harrowing one for the UK economy. Accelerating anxiety over future sales performance, April’s eye-watering tax hike, and US tariffs helped push business sentiment into ominous territory."
Rising tax concerns
A staggering 56% of businesses surveyed identified rising taxes as a growing challenge, the highest level of tax-related anxiety recorded since the survey began in 2004. The increase in employer National Insurance contributions, introduced by Chancellor Rachel Reeves, has particularly exacerbated financial pressures on companies.
The £40 billion tax-raising Autumn Budget, which took effect on 6 April, has raised fears that increased costs will stifle investment, hiring, and consumer confidence. As businesses grapple with these financial burdens, many are scaling back on hiring and training, which could hinder productivity in the long run.
Impact of US tariffs
In addition to domestic tax increases, the looming threat of US tariffs has added to the uncertainty faced by UK businesses. The latest round of tariffs, introduced by former President Donald Trump, has raised concerns that products destined for the US may be redirected to the UK market, undercutting local suppliers and negatively impacting exports.
Analysts warn that these trade disruptions could drag UK GDP growth close to zero in the coming year. Despite a surprising 0.5% growth in February, the overall economic outlook remains fragile, with many businesses expecting domestic sales growth to decline to its lowest level since Q3 2022.
Future outlook
The current economic climate has led to a pervasive sense of despondency among business leaders. With forward-looking indicators of sales and employment activity weakening, many anticipate that conditions may worsen before they improve. The upcoming release of job market data and inflation figures will be crucial in assessing the ongoing impact of these economic challenges.
As businesses continue to navigate rising overheads and external shocks, the need for clear policy direction, fiscal support, and trade stability has never been more critical. The ICAEW’s findings underscore the importance of addressing these issues to restore confidence and foster a more resilient economic environment.
Sources
- UK business confidence sinks to two-year low amid tax hikes and global trade tensions, Business Matters.
- UK business confidence falls as tax hikes and US tariffs bite, East Midlands Business Link.
- Business bosses ‘in state of despondency’ over toxic mix of Labour’s tax hikes and Trump’s tariffs, survey
warns, Daily Mail. - UK business confidence falls to lowest level in over two years, survey shows | Business, The Guardian.
- UK business confidence sinks to lowest level in years after tariff chaos, The Independent.
