‘State of despondency’ as tax raid sets up ‘harrowing year’ for firms
Business leaders’ worries over Chancellor Rachel Reeves’ tax hikes have plunged corporate confidence into “ominous territory”, a leading business association has warned.
The Chancellor launched a multi-billion pound tax raid on British businesses in the Budget last October, and a new report has suggested that the impact of the hikes is continuing to weigh on firms’ confidence, holding back UK growth and setting up a “harrowing” year for business.
The Institute of Chartered Accountants in England and Wales (ICAEW) said it recorded the highest-ever number of firms citing tax as a “growing challenge”, taking business sentiments into negative territory for the first time since 2022.
The share of firms that said they were worried about taxes jumped to 56 per cent from a previous record-high of 41 per cent at the end of last year.
The ICAEW’s chief executive Alan Vallance said the results suggested UK growth could be held back.
“These findings reveal a state of despondency among businesses as they stave off a blizzard of extra outlays, including the rise in national insurance,” he said.
“Businesses are the catalyst for growth, but prosperity for some of them remains a pipe dream as long as these barriers remain.
“Tax worries have never been so prominent, causing record levels of distress for our members for the second quarter running.”
The prospect of US tariffs only added to the sense of fear among firms, the ICAEW also warned, as businesses expected domestic sales growth throughout 2025 to drop to its lowest level in two and a half years.
Manufacturers and engineers are the most concerned about their financial prospects.
Despite offering a 90-day reprieve on his most dramatic tariffs, President Donald Trump has not budged on the 25 per cent tax slapped on all car imports. The trade barriers are set to affect £9bn of trade between the US and UK and subsequently hammer UK carmakers’ sales.
“Economic performance was rather unbalanced with improvements in some segments of the economy overshadowed by a torrid quarter for those sectors most vulnerable to these domestic and global headwinds, most notably manufacturers,” said Suren Thiru, economics director at the ICAEW.
Thiru added that the survey reflected a “sour” mood among UK firms as the chances of high growth in the near term were thin.
Economists have been revising down their forecasts for UK economic growth in light of the uncertainty and trade tensions generated by President Trump’s policies.