Business Confidence in Britain Hits Lowest Point Since Liz Truss’s Mini-Budget Fallout

Business confidence in Britain has plummeted to its lowest level since the aftermath of Liz Truss’s controversial mini-budget, according to new data from the British Chambers of Commerce (BCC).

A survey of 4,808 firms revealed that only 49% of businesses expect their income to rise in the next 12 months, reflecting a drop in optimism to levels last seen in the final quarter of 2022. The decline in confidence coincides with Chancellor Rachel Reeves’s recent decision to raise £40 billion in taxes, primarily targeting businesses.

Key measures in the tax overhaul include increases to national insurance contributions (NICs), such as a rise in employers’ NICs from 13.8% to 15%, as well as a lower threshold for contributions. Over 60% of businesses surveyed cited taxation as a major concern, leading to uncertainty within the corporate sector.

However, a separate report from KPMG presents a more optimistic outlook for the UK economy. Despite the dip in business confidence, KPMG forecasts that the UK economy will likely grow faster than expected this year. The report credits the Chancellor’s additional public spending and a potential reduction in interest rates to around 4% as factors that could drive economic growth. KPMG has revised its growth projection for 2025 to 1.7%, up from an estimated 0.8% growth in 2024, though it warned that inflation will remain above the Bank of England’s 2% target until at least 2027.

The drop in confidence parallels the turbulence triggered by Truss’s brief premiership, which saw a £45 billion package of unfunded tax cuts cause turmoil in financial markets, leading to an emergency intervention by the Bank of England. In contrast, Chancellor Reeves’s October budget aimed to restore stability with a combination of tax hikes and £30 billion in additional borrowing to fund a major public investment program.

Shevaun Haviland, director-general of the BCC, criticized the budget measures, stating that businesses are already scaling back investments and planning to raise prices in the face of higher taxes. KPMG’s economists echoed this concern, suggesting that the tax increases could lead to inflationary pressures as businesses pass on the costs to consumers, even as fiscal stimulus boosts short-term demand.

A Treasury spokesperson defended the budget, calling it a “once-in-a-parliament” initiative designed to restore stability and provide businesses with certainty amid a challenging economic environment.