UK Business Confidence Declines Amid Tax Concerns, Survey Reveals
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Loading... - Akila Salah
- 09 Oct 2024
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Business confidence in the UK has taken a hit in the third quarter, largely due to concerns over tax burdens affecting investment decisions. This sentiment is reflected in a survey conducted by the Institute of Chartered Accountants in England and Wales (ICAEW), which aligns with similar apprehensions expressed by other business groups ahead of the new Labour government's first budget.
The ICAEW's quarterly Business Confidence Monitor reported a decline to 14.4 in the three months leading up to September, down from 16.7 in the previous quarter. This marks the first drop in confidence in a year. Alan Vallance, chief executive of ICAEW, noted that businesses are increasingly troubled by the tax burden, leading to reluctance in investment.
Finance Minister Rachel Reeves has indicated that taxes may need to rise in her upcoming budget on October 30, after discovering a £22 billion ($29 billion) shortfall in public finances left by the previous Conservative government. The ICAEW survey found that 29% of companies identified the tax burden as a growing challenge, the highest level since the survey began in 2004 and significantly above the average of 16%.
A separate survey by the British Chambers of Commerce also highlighted a decline in business morale, driven by concerns over potential tax increases in the forthcoming budget. While the government has ruled out hikes in income tax, corporation tax, value-added tax, and National Insurance, businesses remain worried about other potential tax increases, such as capital gains tax.
In response to these concerns, businesses have slightly reduced their investment plans, with firms in the ICAEW survey planning to increase investment by 1.9% over the next year, down from 2.1% previously.
Prime Minister Keir Starmer is set to host an international investment summit on October 14, aimed at attracting foreign direct investment to bolster economic growth—a key focus since he assumed office in July. Vallance emphasized the need for the chancellor to provide companies with certainty and stability, suggesting that reforms to VAT and business rates, along with public and private investment, could help achieve this.
As the UK prepares for the investment summit and anticipates a challenging budget, the government faces pressure to address business concerns and foster a conducive environment for economic growth.
