Fiscal worries are weighing on UK business confidence, Reuters poll shows

By Suban Abdulla

LONDON (Reuters) – British business confidence fell in the third quarter as tax worries hit investment, according to a survey of accountants, echoing similar concerns from other business groups ahead of the new Labor government’s first budget.

The Institute of Chartered Accountants in England and Wales said on Wednesday that its quarterly Business Confidence Monitor fell to 14.4 in the three months to September, the first drop in a year and down from 16.7 in the previous quarter.

“The findings show that businesses are troubled by the tax burden and increasingly reluctant to invest,” said ICAEW chief executive Alan Vallance.

Finance Minister Rachel Reeves has warned that taxes will likely have to rise in her Oct. 30 budget after she said she had uncovered a £22 billion ($29 billion) hole left in public finances since this year by the previous Conservative government.

The ICAEW said 29% of businesses cited the tax burden as a growing challenge, the highest common in the survey since it began in 2004 and well above the average of 16%.

A separate survey by British Chambers of Commerce on Tuesday also showed a drop in business morale due to concern about the budget’s impact on tax levels.

The government has ruled out increasing the rates of income tax, profit tax, value added tax and national insurance social security payments. But the ICAEW said businesses were concerned about further tax rises, including a rise in capital gains tax.

Companies have already slightly scaled back investment growth plans. Firms in the ICAEW survey said they planned to increase investment by 1.9% over the next 12 months, down from 2.1% previously.

Prime Minister Keir Starmer will host an international investment summit on October 14 aimed at boosting foreign direct investment to help boost economic growth – one of his main missions since coming to power in July.

“As the UK prepares to host a major investment summit and speculation mounts ahead of a tough Budget, the Chancellor must give businesses the certainty and stability they need,” Vallance said.

“Reforms to VAT and business rates, alongside public and private investment … could help achieve this.”

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