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UK Business Confidence Hits Lowest Level Since 2022 Due to Tax Hikes and US Tariffs

Rising national insurance costs, a higher minimum wage, and trade uncertainty are driving economic pessimism and downgraded growth forecasts.

Confidence has been weakest in the manufacturing sector, reflecting increasing fears that any trade war would focus on goods rather than services
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Overview

  • The ICAEW business confidence index fell to -3 in Q1 2025, its weakest level since late 2022, reflecting surging operational costs and trade concerns.
  • A £25 billion rise in employer national insurance contributions and a 6.7% minimum wage increase are straining UK businesses, particularly in manufacturing and retail sectors.
  • US President Donald Trump’s new tariffs, including a blanket 10% import levy, have heightened market uncertainty and fears of a global trade war.
  • Economic growth projections for the UK in 2025 were halved to 1% by the Office for Budget Responsibility, citing combined pressures from domestic taxes and international trade challenges.
  • Businesses are curbing recruitment and investment in staff training as they grapple with escalating costs, which could further hinder productivity and economic recovery.