Business
Business Confidence Falls as UK Firms Grapple with Tax Concerns, ICAEW Report Shows
London – Business confidence in the UK has declined for the second consecutive quarter, according to the latest Business Confidence Monitor from the Institute of Chartered Accountants in England and Wales (ICAEW). Confidence dropped from 16.7 in the second quarter to 14.4 in the third quarter, as businesses voiced concerns over tax burdens and economic uncertainty.
The survey, which collected responses from 1,000 professional advisers up until September 20, found that 29% of respondents identified the “tax burden” as a major issue. This drop in confidence comes amid growing speculation that the government may introduce further tax hikes to address public finance shortfalls.
ICAEW CEO Alan Vallance commented on the findings, stating, “The results show that businesses are troubled by the tax burden and increasingly hesitant to invest. As the UK gears up to host a major investment summit, and with a challenging budget ahead, the chancellor must offer companies the certainty and stability they need.”
Despite easing inflationary pressures, the business community remains concerned about taxation. The survey revealed that salary growth had slowed to 3.6% year-on-year, the lowest in over two years but still nearly double pre-pandemic levels. Wage growth is expected to slow further over the next 12 months.
Domestic sales growth hit a yearly high of 3.8%, but export growth weakened to 2.7%, the lowest rate for 2024. Investment growth also declined slightly, with businesses expecting a 1.9% increase in investment, down from 2.1% in the previous quarter.
Suren Thiru, Economics Director at ICAEW, suggested the figures reflect a “slight reality check” for the UK economy. “Weaker expected export and investment activity, along with concerns about a difficult budget, have dampened business confidence despite a boost from stronger domestic sales growth,” Thiru said.
While the UK economy is projected to grow in the third quarter, the pace of expansion may slow as the positive impact of falling inflation wanes. Business leaders are urging the government to reform VAT and business rates, and to increase public and private investment to promote long-term economic growth.
As the budget approaches, businesses are calling for stability and clearer policy direction to help navigate the economic challenges ahead.
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