Firms mildly confident about growth after worst reading on record
Firm owners are now mildly confident about seeing their companies grow after July’s reading showed business confidence at the second-lowest level on record, according to a leading industry group’s monthly survey.
A survey by The Institute of Directors (IOD) has said that business leaders’ confidence in their own organisations is now in positive territory, having slipped into a net reading of minus nine in July.
The IoD’s leading indicator for firms’ confidence in the UK economy also inched up to a net reading of minus 61 after last month’s figure showed it falling to its lowest level since data collection began in 2016.
But businesses remain worried about high employment taxes and other costs hampering businesses.
Bosses are holding out for this year’s Autumn Budget as they hope Rachel Reeves will not inflict damaging tax rises on companies and squeeze profit margins.
The Chancellor is expected to raise at least £20bn in taxes to fill a hole in the public purse, with the option of raising up to £50bn not being ruled out.
Reeves is reportedly eyeing up extra taxes on home owners and pension pots, with the government likely to be more cautious about hiking costs on businesses after the UK suffered a sharp downturn in employment due to a rise in national insurance contributions.
The Treasury could still hike taxes that damage business confidence, including lowering the £90,000 threshold at which businesses are required to charge customers for VAT.
Taxes and regulations to hamper growth
The IoD’s chief economist Anna Leach said it was “little surprise” to see taxes at the top of businesses’ list of concerns following last year’s Autumn Budget.
“As we head towards another challenging Budget, the government should seize the chance to unlock growth through smarter deregulation,” Leach said.
“Leaders tell us the biggest barriers they face are in employment and trade. Here lies the tension in the government’s growth agenda: while trade policy has focused on reducing frictions and opening opportunities, its employment policies risk moving in the opposite direction.
“Meanwhile ongoing tax rumours further damage confidence. We urge the government to unleash a more coherent and consistent economic plan for the UK, focussed on easing the cost of doing business.”
The regulations which were most likely to reduce growth were rules on employment and the workplace, according to the survey.
But the government’s Employment Rights Bill, which is passing through parliament, is set to dramatically strengthen workplace rules, with a ban on some zero hour contracts and restrictions on firing and re-hiring to be introduced.
Retailers and hospitality firms have hit out at the changes, with top bosses claiming the workers’ rights package will worsen living standards and become “deeply damaging” for Labour’s hopes of driving growth.