Tax concerns have driven a marked fall in business confidence ahead of the Budget, as firms worry about further increases while dealing with the impact of higher employers’ national insurance contributions.

According to ICAEW’s Business Confidence Monitor, published today (9 October), a survey of 1,000 business leaders. Business sentiment currently sits at -7.3, down from -4.2 in the previous quarter. As a result, confidence is at its lowest level since the fourth quarter of 2022 and has fallen for five consecutive quarters.

Businesses under pressure

The tax burden is putting undue pressure on profits, recruitment and investment activity. This, paired with disappointing domestic sales growth, is bringing expectations down. Six in 10 businesses cited the tax burden as a challenge, representing a tenfold rise over the past five years, starting at just 6% in Q3 2020. It also marked the third time since Q4 2024 that tax concerns hit a record high.

Regulatory requirements are also creating significant issues for those surveyed, despite government plans to reduce the burden. Almost half (47%) of leaders cited this as an issue, which marks the highest proportion of businesses marking this as a concern since 2018.

“Economic growth will require the country’s businesses to be confident, to innovate and to invest,” says ICAEW CEO Alan Vallance. “But concerns over further tax rises next month – which appear inevitable – are quashing any sparks of risk-taking or ambition.

"If the government is to come good on its growth mission, it must demonstrate that it is firmly on the side of business by cultivating the conditions in which they can thrive, beginning with a cast-iron commitment not to increase business taxes in this parliament. If it fails to do that, Britain risks sleepwalking into stagnation.”

Investment and growth expectations fall

The UK's domestic challenges were reflected in the sentiment among non-exporters, where confidence plummeted to -10.0 from -4.5. Exporters, by contrast, were less downbeat at -5.5.

Growth of annual profits slowed to 2.3% in Q3, the lowest level since Q4 2023. Growth expectations for the year ahead dropped to a two-and-a-half-year low. Capital investment growth fell from 2.3% in Q2 2025 to 1.8% in Q3.

Property businesses expressed the lowest confidence level, at -23.2. Retail and wholesale firms were also particularly low at -11.4; this reflects the sector’s greater exposure to higher national insurance costs. The industrial sector, however, showed signs of a rebound, with sentiment increasing from -10.1 in Q2 2025 to +4.4 in Q3.

“Our latest survey points to another chastening quarter for businesses as confidence continues to crumble under the weight of a floundering economy, deteriorating profit margins and unprecedented turmoil over tax,” says Suren Thiru, ICAEW Economics Director.

“These figures suggest that firms are making the arduous adjustment to materially higher employment costs by seeking savings through curtailing hiring, limiting staff training and curbing investment plans, impeding key levers of growth and productivity.”

Business-led growth needs certainty

Ahead of the Autumn Budget, ICAEW urged the government not to increase business taxes for the rest of the parliament. In the meantime, businesses are speculating as to what might be in store for them on November 26.

“The mounting squeeze from plummeting confidence and a weakening outlook for domestic sales and employment means the economy will struggle to deliver the uplift in growth needed to avoid more painful decisions at the Budget,” says Thiru.

Weak employment growth – it fell to 0.9% in Q3, from 1.4% in Q2 – marks its lowest point in four years. Again, this is likely driven by the increase in employment costs. Staff training budgets have also fallen to a four-year low.

Domestic sales grew at 3.0% in Q3, but expectations for sales growth for the coming year fell to a five-year low. Export sales growth slowed to 2.4% in Q3, as US tariffs took effect.

“It’s Groundhog Day for Britain’s businesses as we enter another run-up to a Budget with poor growth, strained public finances and a fear that business will once again bear the brunt of higher taxes,” says Vallance.

“Confidence has collapsed, uncertainty remains, and the tax burden has hit another record high. All in all, the findings make for very grim reading.”