Q3 2025: Sentiment rebounds into positive territory and is the most confident UK sector.
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 exports 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.
- Confidence in Energy, Water & Mining rebounded in Q3 2025, reaching +21.2, which is above the sector historical average after temporarily dipping into negative territory last quarter.
- Companies reported only modest domestic sales growth, but exports growth was the highest since Q1 2023 and businesses predict the strongest expansion of all sectors next year.
- Annual input price inflation ticked up again in Q3 2025 after dipping in the previous quarter, but businesses expect cost pressures to dissipate.
- Regulations were once again the most widely reported growing issue, while tax concerns are comparatively low and there was a spike in businesses citing government support.
- Energy, Water & Mining again recorded the strongest rate of both annual employment and salary growth, with rising reports about the availability of non-management skills.
- Renewed sentiment and clarity over government energy policy has reinvigorated investment in the sector, with a sharp rise in spending on capital investment and R&D budget growth that companies plan to maintain next year.
Business confidence in the Energy, Water & Mining sector
Confidence in the Energy, Water & Mining sector rebounded to +21.2 in Q3 2025, after falling to -2.0 in the previous quarter. Sentiment is notably above the sector historical norm (+7.6) and the national average (-7.3). It is one of only two sectors recording a positive score this quarter, alongside Construction, which experienced another decline in sentiment in Q3 2025 and is only just in positive territory at +1.4.
Part of the explanation for the sharp rise in business confidence in Energy, Water & Mining is the easing of global tensions during the quarter, with businesses reporting a strong rebound in export sales in Q3 2025 and predicting healthy expansion next year. Domestic sales have been more modest but with OFGEM announcing a 2% rise in the price cap from 1 October 2025, businesses predict profits growth will rise sharply over the coming 12 months. Greater policy clarity is also boosting confidence in the sector, which stems from the announcements in September under the GB Energy Plan, which included 131 contracts granted to generate a record 9.6 GW of renewables. Companies also reported a sharp rise in investment in this quarter with significant capital expenditure planned for the coming year.
Domestic and export sales growth
Businesses reported rather modest domestic sales growth in the year to Q3 2025. Growth of 2.0% was notably down on the previous quarter and lower than recorded in all sectors apart from Manufacturing & Engineering and the sector-wide average (3.0%). Companies predict growth will rise to 2.8% over the coming year, close to the sector historical average (2.7%) but lower than the economy-wide forecast (4.0%).
However, while domestic sales cooled, businesses reported a resurgence in exports, reporting growth of 6.6% in the year to Q3 2025, significantly higher than any other sector this quarter and the UK average (3.6%). With global uncertainty easing and greater clarity about UK energy policy and investment, businesses expect exports sales growth to remain buoyant, projecting growth of 6.0% for the coming year, over twice the sector historical average (2.9%) and stronger than the economy-wide projection (3.6%).
Labour market
Employment demand strengthened in the year to Q3 2025, with Energy, Water & Mining businesses reporting jobs growth of 3.2%, significantly higher than the national average (0.9%) and the strongest rate across all sectors. Companies plan to slow employment to 1.9% in the year ahead, a figure that is still above the sector historical average (1.3%) and stronger than the national projection (1.2%).
With strong labour demand in the sector, businesses were more likely to report the availability of non-management skills as a growing concern in Q3 2025. The issue was cited by 28% of businesses in Energy, Water & Mining, notably higher than the sector average (19%) and the national average (20%). Staff turnover was also reported by a quarter of businesses, a larger proportion than nationally (21%) and the sector historical average (20%).
A combination of high demand and potentially lower supply meant that businesses also reported the highest rate of wage inflation of any sector in Q3 2025. Salary growth hit 4.3%, the highest rate for a year and ahead of the national average (3.1%). Companies expect the rate to cool to 3.0% in the coming year, which is above the sector historical average (2.5%) and the second highest rate forecast across all sectors.
Input and selling prices, and profits growth
Businesses reported an uptick in annual input price inflation in Q3 2025 to 4.1%, above the national average (3.8%) and one of the highest rates recorded across sectors in the quarter. Input price inflation is expected to ease considerably in the coming year, with businesses predicting a rise of just 2.3%, below the historical average (2.9%) and the UK sector-wide projection (2.8%).
The 7% reduction in the OFGEM energy price cap in July likely played a role in limiting annual selling price rises to 1.8% in the year to Q3 2025. This was weaker than the national average (2.2%) and the sector historical norm (2.1%). With the OFGEM price cap rising by 2% from 1 October 2025, businesses expect higher price rises in the year to come, projecting selling price growth of 3.0% over the next 12 months, the sharpest rate forecast across all sectors and the UK average (1.9%).
Relatively modest selling prices and domestic sales growth limited profits expansion in Energy, Water & Mining in Q3 2025 to just 1.4%, down sharply from 6.4% recorded last quarter and the sector historical average (3.0%). Companies anticipate that stronger domestic sales and sustained exports growth will translate into healthier profit margins, predicting profits growth of 5.6% over the coming year, which is the strongest expectation across all sectors and higher than the UK sector-wide forecast (4.1%).
Business challenges
Regulatory requirements continue to prevail as the most widespread growing challenge for businesses in the sector, with 46% of companies citing the issue in Q3 2025, slightly higher than the sector average (42%). The activities of Energy, Water & Mining companies are highly regulated as they must comply with strict consumer-facing regulations as well as tight controls on their environmental impacts.
A third of companies reported the tax burden as a growing challenge in Q3 2025, above the sector historical average (19%) but significantly down on the historical high from Q1 2025 (55%) and the economy-wide average which rose to 60% this quarter. Energy, Water & Mining had the lowest incidence of the issue across all sectors this quarter.
With renewed confidence and greater clarity over the UK’s energy policy, the largest proportion of Energy, Water & Mining businesses in the survey’s history reported government support as a growing challenge in Q3 2025. GB Energy has a six-month deadline from 16 September to produce its detailed Strategic Plan. As part of this, businesses will be looking to government to deliver against funding commitments to support their own investment plans for the year ahead. Government support was reported by 30% of Energy, Water & Mining companies, over twice the historical average (13%) and the national average (14%).
Investment
Against a backdrop of improved confidence and the government’s renewed commitment to accelerate UK clean energy, businesses reported a surge in investment in Q3 2025. Capital investment growth rose to 5.4%, the highest rate since Q2 2022 and three times the economy-wide average of 1.8% reported this quarter and considerably higher than all other sectors. Companies plan to maintain elevated capital investment growth, anticipating growth of 5.2% over the coming 12 months, significantly higher than the sector historical average (3.0%) and the national projection (1.7%).
Annual R&D budget growth also rose sharply in Q3 2025 to reach 3.5%, the highest across all sectors and close to double the UK average and historical sector average (both 1.8%). Businesses plan to continue to expand growth to 3.6% next year, significantly above the national projection (1.6%) and higher than forecast in all other sectors.