Business confidence hits new low as Budget looms

Business confidence in the UK fell to a fresh record low, as fears of another cost squeeze stoked up an already dire operating environment that was found to have “worsened across the board”.
According to an Institute of Directors (IoD) poll, private sector optimism plunged to the lowest level since the industry body started collecting data a decade ago, piling fresh pressure on new business secretary Peter Kyle and the Chancellor Rachel Reeves, as she prepares her second Budget.
Optimism among business leaders fell to a score of 74 in September, the survey found, meaning nearly 80 per cent of bosses felt either ‘quite pessimistic’ or ‘very pessimistic’ about the outlook for the UK economy over the next year. This was down from a score of -61 in August and eclipsed the previous record — set this July – of -72.
Executives overwhelmingly attributed their dour predictions to fears that the batch of tax hikes expected at this month’s Budget will set off another round of heightened price pressures that will drive up the cost of wages and firms’ other inputs.
The Chancellor is widely expected to unveil up to £30 billion of tax rises when she publishes her second major fiscal event on November 26. Bosses fear the more constrictive fiscal landscape will drive up staff’s wage demands and supply costs in a manner redolent of the months following the government’s fateful £25 billion raid on payroll tax last year.
IoD boss Anna Leach, said: “Business confidence had plumbed new depths, following a fleeting improvement at the tag-end of summer. Conditions worsened across the board, with cost expectations hitting a record high, driven notably by employment costs”.
The bleak poll adds to a string of similar updates that have laid bare the battle the Chancellor is locked in to revive the UK’s economic fortunes. At the end of September, the Office for National Statistics (ONS) confirmed the economy grew by just 0.3 per cent in the second quarter, while the UK’s fiscal watchdog is widely expected to downgrade its all-important productivity forecast, in what would amount to a major blow to the government’s tax-and-spend plans.
Leach added: “The Chancellor’s conference speech rightly reiterated the role that fiscal credibility has in providing the platform for growth. But we urgently need a genuinely growth-focused Budget that has business at its hearts”.
The IoD data was reflected in a similar poll released at the end of September, which also found confidence had slumped as firms braced for the chilling effect of higher taxes. Lloyd’s monthly Business Barometer — whose more optimistic findings mean it has been regularly cited by both the Prime Minister and the Chancellor — dropped from 54 to 42 per cent.
Effect on property market: Business confidence along with an unpredictable economic landscape has had an effect on the property market. It has caused a slowdown in house-buying activity, according to new data.
There were 93,630 residential transactions back in August, two per cent higher than in the same month in 2024 but two per cent lower than July this year, according to HMRC. There has been a “noticeable shift” in sentiment amongst Brits recently, Ryan McGrath, director of Second Charge Mortgages at Pepper Money said.
He added: “In more predictable market conditions, many might have already made decisions to move but economic uncertainty and the financial impact of expiring fixed-rate deals, particularly those secured before 2022, are prompting a reassessment of priorities”.
Chairman of Jackson-Stops, Nick Leeming, added that speculation around housing policy reform in the Budget is “already weighing on the market”.
Director of MT Finance, Tomer Aboody, said: “Buyers are waiting before they make their move. Fearing wealth tax and an annual property tax, many will wait to see if these come about and whether it is financially viable to move”.