In November 2024, business confidence in the U.K. dropped to its lowest point since January 2023, as reported by BDO, a business advisory and accountancy firm.
Concurrently, KPMG noted that UK job vacancies decreased at the quickest pace since the pandemic began. This downturn coincides with warnings from businesses that the Labour Party’s ‘pro-growth’ budget could exacerbate inflation and decelerate hiring.
Tax increases do not fit well with a ‘pro-growth’ agenda. Also, GDP predictions made by the UK chancellor for 2025 through 2027 are lame.
The Labour budget has notably affected U.K. business confidence for a variety of critical reasons:
- Tax Increases: The budget introduced a substantial hike in National Insurance contributions for employers, raising the rate to 15% on salaries above £5,000. This increase has led to concerns about higher operational costs, which many businesses fear will result in job cuts and reduced investment.
- Minimum Wage Hike: The budget also included an inflation-busting increase in the minimum wage. While this aims to improve living standards, it has added financial pressure on businesses, particularly those in sectors with tight margins like retail and hospitality.
- Economic Uncertainty: The combination of these measures has created a sense of economic uncertainty. Businesses are worried about their ability to absorb these additional costs, leading to a decline in overall optimism.
- Investment Concerns: The increased costs have forced many businesses to reconsider their investment plans. Some have already announced cuts to expansion projects and other growth initiatives.
- Next Increase: in public workers pay looms nigh.
These factors have collectively contributed to a significant drop in business confidence, with many firms bracing for a challenging economic environment ahead