Businesses gloomy about state of economy before Budget tax rises
Business leaders remain gloomy about the state of the economy entering the New Year, a new survey shows, as they anticipate the impact of the Budget’s tax increases.
The Institute of Directors’ economic confidence index, which measures business sentiment about the economy, rose to -61 in December, up from -65 the month before but still the fourth lowest reading since the measure’s introduction in July 2016.
The survey demonstrates that corporate confidence in the UK economy has plummeted since October’s Budget.
Chancellor Rachel Reeves hiked employers’ national insurance to 15 per cent in the fiscal event, while also slashing the threshold at which employers have to start paying the levy.
Business groups have warned that they will have to slash jobs and investment budgets in order to deal with the tax increase while data since the Budget suggests economic momentum has already faded.
The UK economy recorded no growth in October for the second consecutive month and has been more or less stagnant since June.
“IoD members remained cautious on the outlook for the year ahead when we surveyed them over the festive period,” Anna Leach, chief economist at the IoD said.
The survey also showed an improvement in most forward looking indicators for businesses’ own prospects, although the metrics remained well below levels since earlier in the year.
Investment intentions rose to 0 in December, from -20 in November, while headcount expectations rose to -1 from -24 in the same period.
To generate more lasting improvement, Leach urged the government to provide businesses with the policy stability to make long-term investments.
“The government must move swiftly to deliver a policy environment in the UK that strengthens investment, with Industrial Strategy, 10 year infrastructure plans and planning reform presenting material opportunities,” she said.