ICAEW’s latest Business Confidence Monitor (BCM) for Q2 2025 showed a further drop in business confidence, fuelled by concerns about the tax burden and slower than expected domestic and export sales growth. 

With business confidence showing a fourth consecutive decline, ICAEW members continue to navigate difficult and increasingly uncertain conditions. This latest survey ran from 7 April to 27 June 2025, a period characterised by geopolitical volatility and mixed domestic economic data.

Ahead of the official BCM Q2 release, ICAEW presented findings at a briefing attended by external stakeholders who were keen to hear real-life anecdotes from ICAEW’s member network about challenges on the ground.

Economic backdrop and ongoing uncertainty

Members continue to bemoan tax increases and economic uncertainty, which they say are impacting consumers’ willingness to spend. “Consumer optimism remains low with people cautious on the outlook of the UK economy. Rising household bills are a factor in reducing discretionary spend and eating out,” was a view from the hospitality sector.

Similar sentiment was shared by members working in manufacturing: “The consumer has just stopped buying – discretionary spend has taken another nosedive.” Meanwhile, in response to increased employers’ national insurance driving negotiated price increases, members warned that this has opened the door to cheaper imports, particularly from China, as it becomes too expensive to export to the US.

In the West End of London, business conditions were described as “tricky” with theatre productions “generally in the doldrums with one or two outliers doing well”. Further evidence of pressure on domestic sales was highlighted by the BCM, and the feeling that people are “hunkering down”. 

As a result of policy announcements in the Autumn Budget, practice firms reported seeing an increase in demand for advisory work and transaction activity, including an uptick in founders wanting to sell.

Across the board, looking to this year’s fiscal event, members raised concerns over the potential for further tax rises in the autumn and increased uncertainty as to where these might fall. 

Geopolitical environment and tariffs

Tariffs are weighing heavily on exports. One manufacturer with 20% of products destined for the US said as a result, it would need to “completely overhaul its sales strategy”.

A member based in the South West reported that business at the container port continues to be “significantly reduced because of the uncertainty presented by tariffs”. A media business anticipated a reduction in client spend in the second half of the year. “While trade agreements with the US and EU are generally positive moves, the lack of clarity means organisations are delaying their decisions,” they explained.

A contrasting view from the East of England was that the geopolitical situation presented its biggest opportunity. With an increased international focus on security, members working in the defence and aerospace sectors – including the supply chains that support them –- are benefiting from a boost in activity. 

Access to finance, investment and growth

On access to finance, a view from a practice member was that banks want to lend, but businesses don’t want to make critical investment decisions because of uncertainty. “To invest, businesses need the confidence that they’re not going to be hurt in six months.” 

In the South West, the risk of flight was noted: “Software and technology entrepreneurs don’t need to run their businesses in the UK and many are voting with their feet, especially if they can get better access to growth capital and human capital elsewhere.” 

In Northern Ireland, members highlighted a lack of clarity on future policies, creating “hesitancy to invest or grow”. Although mergers and acquisitions deals are still happening, they appear to be taking longer due to “cautious decision-making and more complex due diligence, with personal guarantees on loans increasingly sought by lenders to family businesses”.

Labour market 

From April, the Autumn Budget’s policy announcements became a reality. One business employing more than 500 staff in the fast-moving consumer goods sector reported significant cost increases due to the rise in employers’ national insurance, the National Living Wage and the need to maintain pay differentials. It is having a “significant impact on the business that won’t help us to grow”.

Driven principally by cost concerns, a business based in Northern Ireland now employs 500 staff in Mauritius alongside a much smaller number closer to home. Indeed, this month there have been increased reports of businesses exploring outsourcing and offshoring options, to mitigate the growing cost of domestic employment. 

Meanwhile, members across multiple sectors have expressed concerns about the potential impact of the Employment Rights Bill. 

“It’s positioned employers as out to get you when government needs us to be part of the solution,” was a frustration voiced from a member in the East of England. Others described the Bill as a “huge challenge”, with a practice member advising the manufacturing sector anticipating “a disproportionate amount of time spent by business on managing people and teams presenting an additional burden”.

ICAEW member views are invaluable and consistently raised in consultations and discussions with policymakers. We are extremely grateful to our volunteer network of committees, communities and ICAEW regional teams who provide feedback and gather insights. 

Despite the uncertainty, the resilience of members is clear. The ICAEW Annual Conference 2025 on 17 October in central London will this year offer advice on how to lead, adapt and grow in a world of flux. Find out more and book your place.