Business Confidence Falls Again as Tax Concerns Reach Five‑Year High
The latest Business Confidence Monitor, an Institute of Chartered Accountants in England and Wales survey, shows confidence continuing to fall. Confidence has now fallen for six consecutive quarters and is now at its lowest since the final three months of 2022.
The survey, which gathered views from 1,000 business leaders, shows growing concern over tax complexity and the wider outlook for business activity.
Tax pressures rising
A record 64% of businesses said the tax burden was becoming a greater challenge, up from 60% in the previous quarter. According to the report, this reflected uncertainty over what tax changes might be included in the Autumn Budget 2025, combined with the effects of previous tax rises feeding through.
Regulation was the second biggest reported challenge, with 51% of businesses saying it was holding back performance. Many cited the Employment Rights Bill as a contributing factor.
Differences between sectors
Some sectors remain noticeably more pessimistic. Property, retail and wholesale continue to show the weakest sentiment, with construction close behind.
Exporters, however, were more upbeat than non‑exporters. IT and communications was the only sector to report a positive score, at +0.3.
Employment and pay trends
Employment growth slowed to 0.8% in the quarter, the lowest figure since mid‑2021. Manufacturing and engineering, retail and wholesale and transport reduced their headcount as 2025 ended. However, it seems that transport and storage are the only sectors expecting to cut jobs further during 2026.
Salary growth also eased to 2.9%. This is still above pre‑pandemic levels but lower than the rises seen in recent years. The expectation is for pay to increase at a similar pace over the next 12 months.
Sales expectations improving
Despite the fall in overall confidence, there are some bright spots. Expectations for domestic sales improved for the first time since 2024, even though actual growth slowed slightly to 2.9%. Export sales growth rose to 2.5% and is also expected to continue improving in 2026.
Capital investment grew modestly to 2%, although businesses expect to slow their spending plans over the coming year.
What this means for your business
The report paints a picture of businesses managing rising costs while holding back on hiring and major investments. At the same time, the slight improvement in sales expectations suggests many firms are cautiously optimistic about trading conditions in 2026.
If you would like to review how these economic trends might affect your business plans, particularly around staffing, investment or cash flow, please feel free to get in touch. We would be happy to help you!
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