National business confidence has dipped further into negative territory, reflecting subdued sentiment following the Autumn Budget and ongoing concerns around costs, policy complexity and the outlook for growth.

While some businesses continue to report resilience in specific sectors and expect modest improvements in sales over the year ahead, the overall picture is one of caution.

Insights gathered from ICAEW members across the UK help explain the drivers behind these headline figures, providing real-time context on trading conditions, investment decisions and workforce planning.

Trading is ‘uneven’ for most businesses

Members consistently described a difficult and uneven trading backdrop, with cash flow management a top priority.

A holiday destination in the South West captured the mood, citing “ongoing nervousness and desperation for cash”, while a casual dining business in London noted that they were “having to work harder just to stand still”.

Inflationary pressures continue to feed through supply chains. Several manufacturers have reported implementing marginal price increases on a monthly basis, warning that it risks embedding inflation further into the system.

Energy and wage costs were repeatedly cited as factors eroding competitiveness, with a fishing business cautioning that rising costs could encourage activity and jobs to move overseas.

Investment decisions remain constrained by uncertainty. An office equipment supplier reported that a prolonged ‘wait-and-see’ approach had a massive impact on their business, with little change in sentiment since the Budget. Across sectors, members highlighted delayed projects and postponed capital expenditure as businesses seek clarity on policy direction and how trading conditions develop in 2026.

Construction, manufacturing and hospitality are struggling

Construction activity remains subdued. One developer reported that schemes are only viable where land values are negative, reflecting high build and financing costs. While material prices have stabilised, employment costs are now the dominant concern. A London-based practice advising construction clients noted greater certainty on materials but “much more concern on employment costs”.

Manufacturing continues to face weak domestic demand, rising costs and limited confidence in policy support. A Midlands-based member working with clients across the sector remarked that manufacturers “can’t rely on the government for support”.

Other businesses across UK regions highlighted the cost of energy as being uncompetitive, estimating that 60–70% of energy costs are policy-driven. Worryingly, there are also reports of stress emerging in supply chains, with advisers in the Midlands reporting insolvencies trickling through, linked to the automotive sector.

The travel, tourism and hospitality sector remains under pressure. A London-based adviser observed that hotels are performing better than pubs and restaurants, with luxury accommodation proving more resilient than budget offerings.

Casual dining operators reported softer sales since the summer and constrained Christmas budgets, with early signs that 2026 will be challenging. Payroll costs and Business Rates were consistently cited as the principal headwinds.

Global trade feedback reflects both opportunity and frustration. Businesses with established systems and people in place to export to the EU reported more stable performance.

However, others described the cost of exploring new markets as increasingly prohibitive, driven by higher employment costs and trade friction. Tariffs have once again resurfaced as a hot topic.

The Autumn Budget has not restored confidence

Reaction to the Autumn Budget has been broadly consistent and has shaped the early outlook for this year.

Businesses expect relief that outcomes were not worse than expected, but little sense that confidence has been restored. Members across regions described the Budget as politically driven and light on growth measures.

A manufacturing business in the South West likened it to “moving deck chairs on the Titanic”. Others criticised the lack of clarity on tax simplification and a well thought through plan to drive growth.

Specific policy measures continue to shape behaviour. Healthcare and hospitality members flagged the freezing of income tax thresholds as a disincentive to additional work.

National Minimum Wage increases were widely viewed as adding pressure to entry-level hiring. Members in retail and hospitality warned of reduced opportunities for young people, and care providers questioned how higher wage expectations can be met without corresponding increases in funding.

Businesses are tentatively adopting technology and AI

Adoption of AI and automation is progressing, but cautiously. Members consistently pressed that technology is being used to augment people rather than replace them, freeing up time for higher-value tasks.

A construction business in London described AI as enabling staff “to do more interesting things”, while others highlighted ongoing challenges around data quality, cyber-security and GDPR compliance. In retail, AI is reshaping customer behaviour, with online transactions increasingly initiated through AI-driven search rather than traditional websites.

Businesses aren’t recruiting as much

Recruitment appetite has softened across most sectors. Rather than reducing headcount, many businesses are choosing not to replace leavers and are considering offshoring and automation before hiring domestically. Manufacturers in the UK reported a pause on recruitment into 2026, with new roles assessed on whether they could be filled overseas or replaced by technology.

The Employment Rights Act remains a significant concern, particularly for SMEs without dedicated HR capacity. Members described it as increasing risk, cost and management burden, deterring hiring at a time when flexibility is already constrained. A practice member in the Midlands reported clients actively limiting growth or accelerating automation in response.

Resilience remains, but confidence is low

Businesses are adapting through cost control, efficiency gains and restrained investment, rather than expansion. Members continue to call for stability, simplicity and a credible plan for growth. As one member observed, “economic growth isn’t difficult economically – it’s difficult politically”.