UK Business Confidence Declines Amid Growing Concerns Over Budget Tax Increases, According to BCC

LONDON (Reuters) – A recent survey has revealed that British businesses are increasingly pessimistic about their outlook due to concerns over the tax implications of the forthcoming autumn budget by the new Labour government, as well as ongoing conflicts in the Middle East.

The British Chambers of Commerce (BCC) reported that 48% of the 5,152 companies surveyed between August 19 and September 16 identified taxation as their primary concern in relation to the upcoming budget, a significant rise from 36% in the previous survey.

"Businesses are growing more anxious about economic policy, with taxation now at the forefront of their worries," said David Bharier, BCC head of research. "The recent escalation in the Middle East conflict will also play a crucial role in shaping sentiment."

Finance Minister Rachel Reeves will deliver her first autumn statement on October 30, where she has indicated that some taxes may see increases.

Reeves is also expected to revise the government’s fiscal rules regarding public debt reduction, which could allow for additional borrowing and, ultimately, support investment and economic growth strategies.

In August, the UK government’s debt reached 100% of its economic output – a level not experienced consistently since the early 1960s.

The survey found that while 56% of businesses anticipated an increase in turnover over the next year, this figure was down from 58% in the second quarter, with many no longer expecting profits to rise. Additionally, just over 20% indicated they had boosted investment.

"Investment levels remain a significant concern for the UK economy. Despite easing inflation and falling interest rates, most small and medium-sized enterprises are still reluctant to invest," Bharier noted.

Concerns regarding interest rates and inflation appear to be subsiding, with the Bank of England expected to reduce borrowing costs at its next meeting in November, following its first cut in over four years in August and a pause in September.