It would be generally agreed that Britain faces a challenging economic context. Weak global demand, persistent inflation and high borrowing costs are squeezing both households and businesses. Productivity – the main driver of higher output and rising living standards – hasn’t improved for 15 years.
With public finances under huge pressure, none of the options open to the Chancellor in the current Budget announcement were particularly palatable; it is obvious that the government faces tough choices about where and how to prioritise limited resources.
As the chief executive of the Institute of Chartered Accountants England and Wales (ICAEW), Alan Vallance stated recently, the key to unlocking this challenge is growth. Government and business are united in this.
Yet while ministers rightly talk about the need for a growing economy and how it is the government’s central objective, the reality is that – on a daily basis – businesses are finding the prospects for growth really tough. At the ICAEW they see this and are in a position to understand the difficulties.
Their 170,000 members don’t just understand the economy, they shape it: 84 per cent of FTSE 100 boards have an ICAEW member at the table; 3m businesses across the UK are advised by the members every day – from the smallest start-ups to the largest global firms.
And Vallance says he sees great examples every day of British companies providing excellent goods and services to their customers, providing jobs in every community, selling British products around the world and innovating better than any other economy.
However, companies across the country contend with rising costs, skills shortages and too much red tape. These challenges make it far harder to plan for the future or to invest with confidence. For two decades, the Business Confidence Monitor has tracked business sentiment.
The message from the most recent survey was stark: confidence is at a three-year low. In London, business confidence declined for the fourth consecutive quarter in Q2 this year – more than any other region – slumping into negative territory for the first time in two years.
April’s rise in employer’s National Insurance Contributions has been a major concern for businesses in the capital, with proportion of companies citing the tax burden as a growing challenge, reaching a survey-record high of 57 per cent in Q2 2025.
The confidence reading is a stark reminder of the perilous situation facing businesses, who cannot be the cornerstone of growth without an environment that enables them to thrive: prosperity will remain a dream and further pain is inevitable.
It is quite clear that for too long it has been too difficult, too expensive and too uncertain to do business in Britain. And yet, if the UK economy is to bring about some recovery, it is business that will drive investment, create jobs and raise living standards. That means business must be given what it needs to succeed.
That means giving businesses the certainty of knowing there won’t be further tax rises around the corner, which is why the call is to the government to commit to no business tax increases, this parliament.
But it also means giving businesses the confidence that an overly complex system will be made easier, and the encouragement that barriers to growth will be removed and investment incentivised. Furthermore, there is a call for encouraging investment in green infrastructure.
In that context, the government’s recent announcement and the interim report on the ongoing transformation of the business rates system is a welcome step. The report summarised the views of stakeholders and outlined priority reforms the government is considering. It’s a step in the right direction and shows recognition of the need for reform of the system to incentivise growth.
Andy Jalil
The writer is our foreign correspondent based in the UK
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