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Business Confidence Hits Three-Year Low as Tax Fears Mount Before UK Budget

A leading think tank says raising income tax would hurt the economy less than lifting VAT or corporation tax.

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Britain's Chancellor of the Exchequer Rachel Reeves takes part in a conversation on Security Begins at Home with a Strong Economy at the 2025 Global Progress Action Summit, in London, Britain, September 26, 2025. REUTERS/Jack Taylor/File Photo
A view of the financial district in London, Britain, September 23, 2023. REUTERS/Matthew Childs
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Overview

  • The British Chambers of Commerce survey of 4,600 firms shows sentiment stuck at 2022 lows, with 59% citing taxation as a top concern and 48% expecting turnover to rise over the next year.
  • ICAEW’s quarterly index fell to minus 7.3, its weakest in nearly three years, with slower profits growth, reduced hiring and training, and investment cuts linked to higher employer National Insurance.
  • Forecasts from Oxford Economics and guidance from the OBR point to a £20bn–£30bn fiscal gap ahead of the 26 November Budget, increasing pressure on the Chancellor to set out revenue-raising measures.
  • NIESR’s modelling finds a VAT rise would cut GDP by roughly 0.9% in year one and lift inflation, corporation tax hikes would weigh on investment over time, and an income tax increase would be the least damaging option.
  • Business groups warn they are "not ready for another Budget battering", highlighting SME vulnerability in sectors such as retail and hospitality and calling for policy certainty and a pro-growth strategy.