ICAEW research and member insight reveal that businesses are facing too much uncertainty, thanks to tax volatility and global issues including constantly shifting geopolitics and cyber threats. As part of its campaign to back business-led growth, ICAEW has explored the issues and possible solutions.
1. Businesses can’t plan to grow amidst the threat of tax hikes
Mid-year rule changes, reversals, and inconsistent communication make planning impossible. These frequent and poorly signposted shifts undermine confidence and make it extremely difficult for firms to plan effectively, particularly when making long-term investment or hiring decisions.
The lack of a stable fiscal calendar means businesses are often forced to react to changes with little notice, diverting resources from growth and innovation to compliance and risk management.
This volatility disproportionately affects small- and medium-sized businesses (SMEs), which typically lack the capacity to absorb or adapt to rapid policy shifts. The lack of a coherent and predictable tax framework erodes trust, discourages investment and hampers productivity across the economy.
Evidence
29% of businesses cited the tax burden as a growing challenge in BCM Q3 2024, a joint record high for the BCM survey. By early 2025, this figure had surged to 56%, marking an unprecedented level of concern among ICAEW members. The BCM results for Q2 2025 shows that 55% of businesses cite the tax burden as a growing challenge.
Business confidence fell sharply in both BCM Q3 2024 and Q1 2025, which we attribute to the decline in uncertainty around tax policy, including fears of mid-year changes and reversals.
Companies reported reluctance to invest, citing the unpredictability of future tax liabilities and the lack of clarity around upcoming fiscal events.
Business Confidence Monitor results:
Solution
Businesses need certainty: no more business tax hikes this Parliament. Government needs to balance the books. That looks irreconcilable, unless we open the “too difficult” box and address three long-standing barriers to growth that can also broaden the tax base:
- Business Rates: a tax on premises expansion and productivity investment.
- VAT rules: a de facto tax on innovation and growth.
- Employment status: stifling complexity around status deters hiring for temporary contracts.
Publish the long-term Tax Road Map: Although the publication of a corporate tax roadmap in October 2024 was helpful, what businesses really need is a Business Tax Roadmap that covers all taxes and duties. Use the Roadmap to lock in the CT commitments already made (25% cap, permanent full expensing/R&D) and set firm, dated milestones for the remainder:
- business-rates replacement;
- a VAT reform strategy;
- employment-tax reform;
- improving HMRC standards; and
- introducing advanced rulings to improve certainty.
Stick to a single annual fiscal event: The government should confirm its manifesto commitment to one major fiscal event per year, ideally the Autumn Budget where all significant tax and spending decisions are announced. This would replace the current system of multiple fiscal events (for example, Spring statement, Autumn Budget, and other announcements), which contributes to uncertainty and planning difficulties for businesses.
2. SMEs need to a clear path to sustainability
Sustained UK growth now depends on sustainability: climate and nature shocks are already eroding productivity and resilience. Only low-carbon, resource-efficient, nature-positive growth can be durable.
Net zero is a competitiveness issue: unmanaged transition risks may lead to stranded assets, job losses and instability. Integrating sustainability across policy, while helping SMEs adapt, turns risk and the adoption of new technology into higher-value, resilient growth.
Evidence
Costs of inaction: Research estimates a 19% global GDP hit from existing emissions; UK losses of ≥7.4% of GDP by 2100 from climate change, and ~12% from nature degradation.
Transition dynamics: Missing the 2030 halving of emissions and nature-loss reversal raises systemic risk; a slow EV shift could lose ~400,000 jobs, while a faster transition could create ~160,000.
Growth opportunity already visible: The UK net-zero sector grew 10.1% (2023–24) to £83.1bn GVA and 951k jobs (each worth ~£105.5k in value); SMEs (99% of firms) must be supported to enable them to fully capture new opportunities.
Solution
Accelerate the sustainable economic transition
- Whole-economy transition plan: integrate climate, nature and circularity with the delivery of the Industrial Strategy, with clear, time-bound targets and accountability.
- Embed sustainability in fiscal policy: hard-wire climate, nature and circularity into budgetary decision-making (including public procurement) and Green Book appraisal, supporting sustainable growth whilst delivering value for money and improving transparency.
- Align capital with the green transition: complete the plan to require credible Transition-Plan-Taskforce-aligned transition plans from large firms and financial institutions.
Optimise green growth opportunities
- Improve access to finance: adapt start-up loans to incorporate incentives conditional on having a simple net-zero plan, with clear integrated guidance.
- Green skills and competitiveness: Prioritise development of green skills across the UK – especially in the financial sector – to help maintain a leading position against growing international competition.
- Build markets for nature-based solutions (NBS): convene investors/developers to create a pipeline of investable NBS projects at scale, unlocking private capital and regional jobs.
Supporting business sustainability
- Boost uptake of existing help: embed signposting to the UK Business Climate Hub and similar resources within government enterprise and growth campaigns.
- Local sustainability champions for SMEs: designate an SME sustainability and net-zero lead within growth hubs to help broker green funding and signpost firms to advice.
3. Economic uncertainty affects the appetite to invest for the future
SMEs in particular are hit hardest by economic volatility because they operate with thin margins and smaller reserves, leaving little room to absorb wider economic shocks. The results of ICAEW's Business Confidence Monitor for Q2 2025 shows inflation and rising input costs squeezing cashflow, while over half of businesses cite tax and regulatory burdens as major pressures.
Higher interest rates have raised the cost of borrowing, and supply chain disruptions have driven exporter confidence down to -6.1, with manufacturing and engineering confidence falling to -14.0. As a result, domestic and export growth expectations are at five-year lows, and firms are scaling back capital investment and research and development (R&D), leaving SMEs with almost no buffer to fund long-term growth.
Evidence
Costs are rising – over half of businesses (55%) report the tax burden as a growing challenge, while input price inflation, especially fuel and food, continues to climb.
Borrowing is more expensive – higher interest rates are pushing up the cost of credit, making access to finance harder just as SMEs need support to manage volatility.
Demand growth is slowing – domestic sales growth expectations are just 4.1% and export sales growth 3.5%, both at five-year lows.
Exporter confidence is falling – global supply chain pressures, including US tariffs, have driven exporter confidence down to –6.1.
Investment and innovation are stalling – capital expenditure and R&D growth projections remain weak, with many firms delaying or scaling back long-term plans.
Solution
Stabilise costs and policy signals: simplify and modernise taxes (employment status; VAT; and business rates reform programmes) and commit to multi-year fiscal and regulatory frameworks. This would counter rising costs and uncertainty, which the BCM shows are major drags on SME confidence (55% cite the tax burden; regulation remains a top challenge).
Improve finance and support access: as above use the Business Growth Service as a one-stop hub for advice, funding schemes, and investment readiness. This would simplify the fragmented support landscape and help SMEs secure affordable finance at a time when higher interest rates make borrowing harder.
Boost trade and supply-chain resilience: provide tailored export support, including simpler customs/VAT processes and diversification incentives. With BCM data showing exporter confidence at –6.1 and manufacturing at –14.0, reducing barriers to trade would directly support growth in the sectors most exposed to global shocks.
4. Constant policy change chills investment
Britain’s business policy has too often shifted with the political weather, chilling investment and growth.
Businesses told us they need a stable, decade-long framework, not moving goalposts. Fragmented, sometimes contradictory signals (for example, Level 7 apprenticeship funding) scatter effort across departments and blunt otherwise good ideas. Add an unclear split between Westminster and devolved governments, and firms don’t know who to engage or when. That stalls plans.
Evidence
- Frequent shifts deter investment: in our 2024 response to the Government consultation on the Industrial Strategy, we found that that “policies and incentives that change too frequently … deter businesses from investing and stifle economic growth,” urging a stable, decade-long framework.
- Risk of scattered initiatives: we also found that overlapping or misaligned actions across government departments, such as inconsistent policy signals (e.g., Level 7 apprenticeship funding decisions) that undermine growth strategies.
- Central–local policy mismatch: ICAEW stressed the need for clear “rules of engagement” between Westminster and devolved administrations, noting that uncertainty over which level of government to engage with hinders business planning.
Solution
Commit to existing policies by following through on its existing policy commitments, completing ongoing projects, and allocating sufficient resources to government departments and the private sector.
Place the Industrial Strategy Advisory Council on a legislative footing to ensure continuity and reduce the risk of strategy reversal by future administrations.
Introduce clear “rules of engagement” between Westminster and devolved administrations to reduce and prevent uncertainty.
5. The rapid escalation of cyber threats
The increase in cyber threats, particularly ransomware is exposing a critical vulnerability in UK businesses and many are not prepared to defend against or recover from such attacks.
Cyber criminals are increasingly targeting firms with weak cyber hygiene and conducting schemes that exploit human nature and basic technical vulnerabilities, such as outdated systems and weak passwords.
For many businesses, the absence of dedicated cyber security teams, and basic cyber hygiene including robust data backup infrastructure, and incident response plans means that a single attack can result in severe financial loss, operational disruption, and reputational damage. The complexity and cost of cyber insurance, coupled with limited awareness of available government support, further compound the risk.
As digital dependency grows, the gap between threat exposure and business resilience continues to widen posing a systemic risk to productivity, trust, and economic stability. In fact, the UK Home Office considers ransomware to be the greatest of all serious and organised cyber crime threats.
Evidence
The Q2 2025 results of the BCM does not isolate cyber security as a standalone indicator, however it does reflect broader concerns about digitalisation, automation, and risk management. Businesses are increasingly turning to technology to manage costs, but ICAEW members have flagged integration challenges, talent gaps, and exposure to digital threats as key issues.
The UK Government's Cyber Security Breaches Survey 2025 revealed that 43% of business and 30% of charities had reported a cyber-security breach or attacks in the previous 12 months.
Further articles:
Solution
Establish a national cyber resilience fund for SMEs: Create a targeted funding programme to help small- and medium-sized businesses invest in essential cyber security infrastructure - such as secure cloud systems, data backup solutions, and staff training. This could be delivered through local enterprise partnerships or industry bodies.
Enhance cyber security education and awareness: Fund sector-specific training programmes and awareness campaigns to improve digital literacy and cyber-risk understanding among business leaders and staff.
Incentivise cyber insurance uptake: Offer tax relief or premium subsidies for businesses that invest in comprehensive cyber insurance, particularly those in high-risk sectors or with limited internal capacity. Many insurance providers require a level of cyber control and therefore this measure can help with prevention and recovery.
More recommendations
Drawing on members expertise and our research into business confidence, ICAEW has outlined recommendations to policymakers advice on how to approach regulating for growth.
Find out moreDownload