Business leaders’ confidence in the prospects for the UK economy has dropped towards levels not seen since the pandemic, as fears over rising national insurance bills worry companies. The Institute of Directors’ (IoD) monthly Economic Confidence index fell to -65 in November, down from -52 during October in its fourth consecutive monthly fall.
Conducted in the aftermath of the controversial October Budget, November’s survey produced the second lowest reading of the index recorded since it began in July 2016, being topped only by a score of -69 in April 2020.
“Far from fixing the foundations, the Budget has undermined them, damaging the private sector’s ability to invest in their businesses and their workforces,” said Anna Leach, chief economist at the Institute of Directors.
Included in the Budget was a rise to the national insurance paid by companies, with 83 per cent of respondents stating they expected their bills for the tax to increase. Half of business leaders said the increased tax would eat into wage increases, with 44 per cent expecting an increase in prices and 43 per cent forecasting a decline in employment.
The IoD’s grim findings came just ahead of a survey of business leaders by the London Chamber of Commerce and Industry (LCCI), which reveals that just one in four bosses has confidence in the government to deliver economic growth, in a sign firms are “losing faith” in ministers’ strategy.
The business groups own poll found 81 per cent of business leaders said they were not confident the government will address firm’s concerns. Some 45 per cent of respondents predicted a hiring freeze, while 47 per cent of those polled forecasted lower pay for staff over the coming years. Just under 40 per cent of respondents predicted changes in the government’s employment rights bill would mean a hiring freeze, while 16 per cent feared it would lead to redundancies.
The IoD said that economic conditions continue to be the most significant factor identified by business leader for having a negative impact on their organisations, rising from 56 per cent in August to 73 per cent.
“There’s now a significant risk of growth stalling across the private sector due to the extent of the reset required by business,” added Leach.
Moreover, the Government’s move to limit inheritance tax relief for family-owned businesses could cost Britain roughly 125,000 jobs and significantly reduce economic activity, new research has found.
The change unveiled in Labour’s first Budget could reduce the value of goods and services produced across the UK economy by £9.4bn and incur a £1.3bn net loss for the Treasury between 2026/27 and 2029/30, according to a study by CBI Economics.
The latter figure contrasts with a £1.4bn gain in revenues estimated by the Office for Budget Responsibility over the same period from the change to business property relief (BPR). BPR allows assets of privately-held firms and shares in companies listed on London’s junior stock market AIM to be passed on free from inheritance tax.
Rachel Reeves announced in the Budget that business assets over £1m would be charged 20 per cent inheritance tax from April 2026, half the standard rate. The first £1m of assets would remain exempt from inheritance tax.
The new research, commissioned by non-profit group Family Business UK (FBUK), predicted around 5,000 family firms with assets valued at more than £1m were expected to change hands between 2026/27 and 2029/30.
Its survey of 234 family businesses found that owners were most likely to mitigate the additional tax liability by downsizing, cutting investment or reducing staff numbers. The study projected an average reduction of 16.5 per cent in investment, 10.2 per cent in headcount and 7.4 per cent in turnover. (The writer is our foreign correspondent based in the UK)
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