UK Business Sentiment Remains Low Amidst Tax Concerns Ahead of Autumn Budget

Business Confidence Stagnates Ahead of Key Fiscal Event

A recent survey by the British Chambers of Commerce (BCC) has highlighted a continued state of low business sentiment across the United Kingdom, with firms expressing significant concerns, particularly regarding taxation, ahead of the Autumn Budget 2024. The BCC's Quarterly Economic Survey (QES) for Q3 2024, which gathered responses from over 4,600 businesses, predominantly small and medium-sized enterprises (SMEs), indicated that confidence and investment levels remained at those seen in 2022.

The findings underscored a fragile economic outlook, with businesses grappling with rising costs and an uncertain policy environment. This sentiment was further echoed in the subsequent Q4 2024 QES results, released in January 2025, which confirmed that business confidence had fallen to its lowest level since the aftermath of the mini-Budget in Autumn 2022.

Turnover Expectations Remain Subdued

The survey revealed a cautious outlook on future growth. In the Q3 2024 survey, less than half of responding firms, specifically 48%, anticipated an increase in turnover over the subsequent 12 months. A significant 21% expected a decrease in turnover, while 32% foresaw no change. This trend continued into the Q4 2024 results, where only 49% of businesses expressed confidence that their turnover would grow in the next year, a slight uptick from Q3 but still indicating widespread apprehension.

Investment intentions also reflected this hesitancy. The Q3 2024 QES showed that only 21% of businesses had increased investment, with 25% scaling back their plans. The Q4 2024 data reported that only 20% of respondents increased plant/equipment investment, while 24% reported a decrease. These figures suggest that many firms are reluctant to commit to significant expansion in the current climate.

Taxation Emerges as the Foremost Concern

Taxation has solidified its position as the leading worry for UK businesses. The Q3 2024 survey found that 59% of firms cited tax as a concern, an increase from 56% in the previous quarter and a substantial jump from 36% before the 2024 Budget. This concern intensified further in the Q4 2024 results, with 63% of businesses identifying taxation as their top worry, a notable rise from 48% in Q3.

This heightened anxiety is largely attributed to the impact of the employer National Insurance Contributions (NICs) rise implemented in April 2024, which businesses perceive as a significant pressure point. Chancellor Rachel Reeves delivered the Autumn Budget 2024 on Wednesday, October 30, 2024, a fiscal event closely watched by the business community for its implications on tax and spending.

Broader Economic Pressures and Calls for Stability

Beyond taxation, businesses continue to face other economic headwinds. The Q3 2024 survey noted a sharp rise in concern about inflation, cited by 57% of firms, marking the highest level since the start of 2024. While inflation concerns remained significant in Q4 2024 at 47%, worries about interest rates saw a slight decrease to 28%. Labour costs also continue to exert pressure on businesses.

David Bharier, Head of Research at the BCC, emphasized the challenging environment, stating, 'Ahead of the Chancellor's statement next month, our survey shows many firms remain bruised and are not ready for another Budget battering.' The BCC has consistently called for certainty and a long-term economic strategy from the government, urging against further tax increases on businesses to foster an environment conducive to investment and growth.