British business morale plunged to its lowest point in two years during late 2024, driven by tax concerns following the Labour government’s first budget, according to a survey by the Institute of Chartered Accountants in England and Wales (ICAEW). The ICAEW’s confidence index dropped sharply from 14.4 in the third quarter to 0.2 in the fourth quarter, the weakest level since late 2022, when the mini-budget crisis under then-Prime Minister Liz Truss shook the economy. Business sentiment has been dampened by Finance Minister Rachel Reeves’ budget, announced on October 30, which included significant increases in employer payroll taxes.
The report highlighted growing corporate worries about tax burdens and a slowdown in domestic demand, which compounded the economic strain. According to Suren Thiru, ICAEW’s economics director, the UK economy experienced a challenging close to 2024, with declining domestic activity and tax-related aftershocks undermining confidence. Additionally, stagnating output, rising government borrowing costs, and a weakening pound have raised concerns about the broader economic outlook. While Reeves emphasized that her budget aims to boost long-term growth and public spending, immediate business sentiment remains pessimistic.
The ICAEW noted that input cost inflation hit its lowest point in three years, though firms anticipate it will rise again due to fiscal measures and global uncertainties. Selling price expectations also reached their lowest since early 2022, reflecting softening demand. The survey, which polled 1,000 accountants between mid-October and mid-December, underscores the challenges faced by businesses as they brace for April’s tax increases. The Bank of England now faces a critical task of assessing how these fiscal changes might impact inflationary pressures and economic recovery
