The tax hike is blamed for a slide in business confidence as KPMG forecasts a pick-up in growth
Business confidence in Britain has fallen to its lowest level since the rapid collapse of Liz Truss’s budget deficit, according to new data from the British Chambers of Commerce (BCC).
The researchers found that 49 percent of the 4,808 companies surveyed expect revenue to increase in the next 12 months, consistent with sentiment levels from the last quarter of 2022.
The drop coincides with Chancellor Rachel Reeves’ decision to raise £40 billion in tax, mainly aimed at businesses. The rise in national insurance contributions (NICs), including a rise in employers’ NICs to 15 per cent from 13.8 per cent and a lower contribution limit, has left UK companies unsettled, with more than six in ten citing tax as a major concern.
However, a separate report by KPMG suggests that despite the drop in confidence, the UK economy is likely to grow faster than expected this year, boosted by more public spending by the chancellor and an expected drop in interest rates to around 4 percent. KPMG forecasts growth of 1.7 percent in 2025, up from an estimated 0.8 percent last year, although it warns that inflation will remain above the Bank of England’s two percent target until 2027.
Liz Truss’ interim prime minister saw a £45 billion package of unfunded tax cuts spark financial market turmoil, forcing the Bank of England to intervene. Reeves’ October budget took a different approach, opting for a combination of tax increases and $30 billion in additional borrowing to fund the largest public investment program in a generation.
Shevaun Haviland, director-general of the BCC, criticized the chancellor’s actions, warning that companies “are already cutting back on investment and saying they will have to raise prices in the coming months.” KPMG economists emphasized that concerns about rising prices, noting that businesses facing higher taxes may pass on to increased costs as fiscal stimulus fuels short-term demand.
A Treasury spokesman defended the budget, describing it as a “parliamentary” move designed to restore stability and give businesses some certainty in a challenging environment.
