Business confidence at ‘rock bottom’ as tax rumours spook directors
Business confidence remained at “rock bottom” in October as Budget rumours test executives’ nerves amid fears of rising costs and a collapse in growth, a top industry group’s survey has indicated.
Rachel Reeves has publicly said that tax hikes are under consideration at this year’s Budget while rumours have suggested big businesses could be hit from new rules on capital gains tax, higher levies and hits to consumers’ disposable income.
The Institute of Directors’ (IoD) latest survey has uncovered the effect tax rumours are having on bosses’ growth expectations.
It showed that the score for business confidence in the UK economy for the next 12 months was -73, a one point rise from September, which was the lowest reading on record.
Directors’ confidence in their own organisations hit a neutral reading of 0 as it rose slightly from the month before.
But business leaders were generally pessimistic about their future prospects.
The survey showed that headcount expectations and investment intentions remained in negative territory despite slightly better readings in October.
Revenue expectations crept into positive territory at a net balance of 13 while export expectations improved by two points.
The survey also showed that cost expectations remained elevated in signs that firms are still struggling with high energy bills and stubborn inflation levels.
Business confidence suffering from taxes
“Business confidence remained at rock bottom in October, as businesses expect the worst from the Autumn Budget,” said Anna Leach, chief economist at the IoD.
“Business leaders are worn out from the past year’s roller coaster of uncertainty and tax increases. We hear repeatedly of the effects: planning horizons shortened, hiring cancelled or outsourced, and discretionary spend on hold.
“Businesses need certainty over their costs – both tax and regulatory.”
The IoD has led calls for the Chancellor to raise income taxes at the Budget in order to fill a fiscal hole, with business chiefs claiming the tax burden should be “spread more evenly across the economy”.
It has also joined up with other industry groups in calling for the government to compromise on measures in the Employment Rights Bill given Labour’s ambition to cut 25 per cent of the regulatory burden for businesses.
Reports have suggested that the government is considering simultaneously raising income taxes and reducing national insurance, which would represent a breach of manifesto commitments.
Industry groups have also demanded the government focus on boosting training levels in the UK and reducing energy bills in order to boost growth hopes.
Business chiefs have now sent in their list of Budget demands before a recent deadline on recommendations.
Firms are now anxiously waiting to find out how the government plans to plug a near-£30bn fiscal hole without damaging Labour’s growth missions.
Shadow Chancellor Mel Stride said: “Business confidence has been shattered – not by global shocks, but by Labour’s choices.
“Rachel Reeves promised the most pro-business Treasury ever. Instead, she’s hit employers with a £25bn jobs tax, and now even more taxes are coming because she hasn’t got a plan or the backbone to control spending.”