UK business confidence has dropped to its lowest point in over two years as concerns mount over tax increases and US President Donald Trump’s intensifying trade war, a new survey reveals.
The Institute of Chartered Accountants in England and Wales (ICAEW) described the first quarter as “harrowing” for British companies in its assessment of economic risks, The Guardian reported.
The professional accounting body’s survey of 1,000 chartered accountants revealed a significant decline in business confidence, driven by unprecedented tax concerns, mounting cost pressures, and diminishing sales expectations.
ICAEW’s business confidence index fell to -3, the weakest reading since Q4 2022, down from 0.2 in the final quarter of 2024. The index operates on a scale where 100 would indicate all respondents were extremely confident about future prospects, while -100 would represent complete pessimism.
“These figures suggest that this year has so far been a pretty harrowing one for the UK economy as accelerating anxiety over future sales performance, April’s eye-watering tax hike and US tariffs helped push business sentiment into ominous territory,” said ICAEW economics director Suren Thiru.
Despite the pessimism, Britain’s economy exceeded expectations in February, with official figures showing 0.5% growth as consumer and business spending continued despite the increasingly challenging environment.
While business surveys indicated rapid job cuts comparable to those during the 2008 financial crisis, official data has painted a more resilient picture.
Growing concerns centre on the impact of Rachel Reeves’s employer national insurance contribution increases, which took effect April 6 as part of her £40bn tax-raising autumn budget.
The fallout from Trump’s global trade war is also expected to impact Britain’s economy significantly. The National Institute of Economic and Social Research has warned that high US tariffs could reduce UK GDP growth to near zero next year.
The ICAEW survey found a record 56% of businesses citing tax increases as a growing challenge – the highest level since the survey began in 2004. Deteriorating economic conditions have also led businesses to lower their domestic sales growth expectations for the coming year.
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