Business confidence dented by fears of higher taxes in budget

Fears of further tax rises in this month’s budget have led to a fall in business confidence for the first time in a year.
The latest business confidence monitor from the Institute of Chartered Accountants in England and Wales shows a drop among companies to 14.4 in the third quarter from 16.7 in the previous three months.
The survey of 1,000 professional advisers, which took responses up to September 20, before the Labour Party conference, showed that 29 per cent of respondents cited the “tax burden” as a growing concern.
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The level of confidence remains double where it was before the pandemic when business was grappling with the impact of Brexit. The results of the survey do not distinguish between the existing tax burden and the potential for fiscal changes in the budget.
Alan Vallance, chief executive of the institute, said: “The findings show that businesses are troubled by the tax burden and increasingly reluctant to invest. As the UK prepares to host a major investment summit, and speculation mounts ahead of a difficult budget, the chancellor must give companies the certainty and stability they need.
“Reforms to VAT and business rates, alongside public and private investment to drive long-term growth and prosperity for the UK, could help to achieve this.”
In a sign of easing inflationary pressures on companies, a recent and persistent concern, the institute survey found that salary growth slowed slightly to 3.6 per cent year-on-year, the lowest rate for more than two years but still nearly double the pre-pandemic average. Overall, wage growth is expected to slow further in the next 12 months, the survey found.
Other data from the survey shows that export growth slowed to 2.7 per cent from 3 per cent in the second quarter of the year and the lowest in 2024. Domestic sales growth, meanwhile, rose to 3.8 per cent, up from 3.3 per cent, and fastest for a year.
Average growth in investment is expected to be 1.9 per cent, down from 2.1 per cent in the last quarter.
“These figures suggest a slight reality check for the UK economy as weaker expected export and investment activity, alongside fears of a painful budget, dented business confidence despite a boost from stronger domestic sales growth,” Suren Thiru, the institute’s economics director, said
“While our survey indicates that the economy will expand in the third quarter, the pace of growth is likely to be slower compared to recent quarters as the momentum from the large recent falls in inflation fades.”