Q3: Sentiment edges ahead of the UK but remains in negative territory.
The latest national Business Confidence Monitor (BCM) shows that business sentiment deteriorated further into negative territory in Q3 2025. This increased pessimism is underpinned by elevated concern over the tax burden, as well as above-average inflation and weak domestic and export sales growth eroding businesses’ profit margins.
The survey results are based on 1,000 telephone interviews among ICAEW Chartered Accountants covering a range of UK sectors, regions and company sizes, ensuring a representative picture of the UK economy. The latest quarterly findings are based on the period 14 July to 24 September 2025.
- The East of England Business Confidence Index improved slightly in Q3 2025 but remains in negative territory and below the historical average, at -3.9.
- Annual domestic sales and exports growth both slowed considerably and, while uplifts are anticipated over the coming year, both are set to remain below UK averages.
- The tax burden remained the main growing concern in the region, followed by regulations and competition in the marketplace.
- While input prices, selling prices and salary inflation all softened compared to the previous quarter, profits growth fell to a four-year low.
- Labour demand continued to cool, with employment growth dropping to the lowest rate since Q2 2021.
- The investment outlook is weak among businesses in the East of England, with growth in capital expenditure and R&D budgets expected to lag the national average over the coming year.
Business confidence in East of England
The Business Confidence Index in the East of England picked up slightly in Q3 2025, but remains in negative territory, rising from -4.8 to -3.9. Sentiment remained below the region’s historical average (+4.3) for the fourth consecutive quarter, but businesses were more optimistic compared to the UK average (-7.3).
Companies in the East of England reported significant slowdowns in both domestic sales and exports growth over the year to Q3 2025 and, while they expect improvements over the coming year amid easing global uncertainty, confidence remains in negative territory as largely domestic concerns about the tax burden and regulations remain prevalent.
Domestic sales and exports growth
Businesses reported a marked slowdown in annual domestic sales growth in Q3 2025 to 2.2%, falling below the region’s historical (3.1%) and the national (3.0%) average. This moderation in domestic sales growth is likely linked to similar slowdowns in the locally important Business Services and Property sectors over this period. Companies in the East of England expect a significant uplift in domestic sales growth in the year ahead, to 3.8%, however this projection is marginally weaker than the 4.0% rise forecast nationally.
At the same time, businesses in the region also reported that exports growth declined significantly from the previous quarter, falling to 1.2%. This expansion was half the pace recorded across the UK (2.4%) and among the weakest increases of any UK region. Businesses in the East of England expect a marked improvement in exports growth over the next year, predicting the rate of expansion will accelerate to 3.4%, climbing above the historical average (3.0%) but this is marginally below the projected UK-wide increase of 3.6%.
Business challenges
Companies in the East of England are still adapting to April’s increase in employers’ National Insurance Contributions and the proportion of businesses in the region citing the tax burden increased for the six consecutive quarter in Q3 2025, to 58%. This proportion was a new survey record high and over three times the region’s historical average (18%) and likely also reflects anxieties businesses may have about potential further tax rises in the government’s forthcoming Budget in November.
Regulatory requirements also remain a prevalent growing challenge in the East of England, with 47% of the companies surveyed citing these issues in Q3 2025. This uptick is likely linked to rising concern about regulatory requirements across many sectors, including Construction and Retail & Wholesale, which are both regionally significant. The proportion of citations was notably above the region’s historical average (39%) and matched the rate recorded across the UK (43%).
Weaker annual domestic sales and exports growth is reflected in the prominence of reports about competition in the marketplace, which is the next most widespread concern in the East of England. This issue was cited by 41% of companies in the region, significantly above both the historical norm (36%) and UK average (42%), with the issue only more prevalent in Wales. This is likely linked to the increase in concern about competition from businesses in the Property sector, which has a strong regional presence in the East of England.
Labour market
Companies in the region reduced the rate at which they increased their staff levels in the year to Q3 2025, to 0.6%, the lowest rate reported since Q2 2021. This sluggish expansion was less than half the region’s historical average (1.3%) and below the UK-wide increase (0.9%) and is undoubtably linked to April’s increases in both the National Living Wage and employers’ National Insurance Contributions dampening the demand for labour. Over the next 12 months, businesses in the region plan to uplift employment growth to 1.4%, marginally outpacing the projected national expansion (1.2%).
Following an uptick in the previous quarter, annual salary inflation softened significantly in Q3 2025, to 2.9%. This rate of growth was still above the historical norm (2.3%) but was marginally below the UK average rise of 3.1%. Businesses expect salary growth to moderate slightly more over the coming year to 2.7%, matching the UK-wide projection.
While reports of skills-related challenges continued to ease in the quarter and remain below their respective regional historical averages, the issue of staff turnover was reported by 22% of businesses, above the region’s historical average (18%).
Input prices, selling prices and profits growth
Input price inflation eased slightly to 3.7% in the year to Q3 2025, marginally below the 3.8% expansion recorded across the UK. Companies expect input price growth to ease significantly over the year ahead to 2.9%, though this is still higher than the UK average projection of 2.8% and above the region’s historical average rate (2.7%).
Businesses in the region recorded annual selling price growth of 2.5% in Q3 2025, notably above the national average (2.3%) and among the sharpest increases in the UK. Businesses plan to moderate annual selling price inflation over the year ahead to 2.2%, with price growth still anticipated to outpace both the national average projection (2.0%) and the region’s historical average (1.4%).
Weakened domestic sales and exports growth is reflected in sluggish profits growth of 0.9% in the year to Q3 2025. This increase was less than a third of the region’s historical average (3.0%) and the softest rise since Q2 2021. Companies in the region predict a significant improvement in profits growth to 3.3% over the coming year, but this expansion is lower than the expected national average (4.1%).
Investment
Weaker profits growth in the East of England has dampened companies’ appetites to invest in capital in the year to Q3 2025, with growth slowing to 1.3%, significantly down on both the region’s historical norm (2.0%) and the UK average (1.8%). Companies plan to raise capital expenditure growth at a similar pace over the coming year, with an uplift of 1.4%, marginally down on the rate projected across the UK (1.7%).
Companies in the East of England recorded annual R&D budget growth of just 0.3% in Q3 2025, the softest rise since Q3 2009 and significantly behind the UK average increase of 1.8%. While businesses in the region intend to increase the rate of growth to 0.9% over the next year, it is one of the weakest projections of any UK region and lower than its historical average of 2.1%.