Business confidence slumps as budget nears

Confidence among business leaders has drained away in advance of the autumn budget as they weigh up the prospect of higher taxes and stricter employment regulations.
The Institute of Directors’ economic confidence index, which measures business leaders’ optimism about the economic climate, registered a decline from -12 in August to -38 in September. The index also recorded a slide in directors’ investment intentions, which have steadily fallen over the summer, from 36 in July to 23 in August, down to -6 in September.
Meanwhile, private sector businesses have indicated that they expect no change in activity levels over the next three months, according to the Confederation of British Industry’s latest growth indicator. The index has recorded positive growth expectations for seven consecutive months, but Alpesh Paleja, interim deputy chief economist at the CBI, said the outlook for the rest of the year had “deteriorated”.
Sir Keir Starmer, the prime minister, signalled he was going to increase taxes when he said that the state of the nation’s finances was “worse than we ever imagined” and warned that “those with the broadest shoulders should bear the heavier burden”.
Anna Leach, chief economist at the Institute of Directors, said: “Members cite ongoing concerns over likely tax increases, the cost of workers’ rights, international competitiveness, broader cost pressures and the general outlook for UK economic growth.
“There are a number of policy announcements forthcoming which could help foster a more supportive environment for growth and investment and underpin an improvement in business confidence.
“In the next few weeks we expect to see more detail on industrial strategy, the business tax road map and a likely update to the fiscal rules to better recognise the contribution of public sector investment to the UK’s asset base.”
The report comes after consumer confidence fell in anticipation of an increase to tax rates and a restriction to winter fuel payments. The GfK consumer confidence index fell from -13 in August to -20 in September, which Neil Bellamy, consumer insights director at GfK, attributed to consumers “nervously awaiting” the new government’s first budget on October 30.
Palega said: “The government needs to use the forthcoming budget to build momentum behind the economic recovery and give businesses the confidence they need to invest.
“Pressing ahead with reforms to planning, publishing a business tax roadmap and delivering a clear and comprehensive industrial strategy would all help to achieve that goal.”