UK Businesses Experience a Significant Decline in Confidence According to the CBI

UK Business Confidence Plummets After Budget

Expectations for Growth Take a Decisive Turn for the Worse

According to recent reports from the Confederation of British Industry (CBI), business confidence in the UK has hit its lowest level since the early months of the Covid-19 pandemic. The CBI’s latest growth indicator shows that expectations for growth have turned negative for the first time this year, with a majority of companies expecting activity to decline in the next three months.

Key Findings

• Business volumes in the services sector are anticipated to decline, including consumer services.

• More firms in the business and professional services sectors expect a drop in activity than a rise in the next three months.

• Private sector activity declined again in the three months to November, with all three major sectors (services, manufacturing, and wholesale and retail) reporting falling business volumes, sales, or output.

Concerns Over Tax Rises and Employment Rights Bill

The CBI’s findings come as private sector activity declined again in the three months to November. The chancellor’s budget at the end of October contained £40bn of tax rises, including £25bn from increasing national insurance contributions (NICs) paid by companies. This has left businesses with even more tough choices to make.

The employment rights bill is also a concern for firms, with 38% predicting changes will mean a hiring freeze and 16% warning it will lead to job losses. Just over three-quarters feel that the government has not meaningfully engaged with businesses on the measures.

Quotes from Industry Leaders

• “As we head into 2025, expectations for growth have taken a decisive turn for the worse,” said Alpesh Paleja, the CBI’s interim deputy chief economist.

• “This snap survey has confirmed our worst fears; the business community views the combined package of increased employer national insurance contributions, cuts to business rates relief and the employment rights bill as a serious threat to their operations over the coming years,” said Karim Fatehi, the chief executive of the London chamber.

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Share Your Thoughts

What do you think is behind the decline in business confidence in the UK? Share your thoughts with us on social media using the hashtag #UKBusinessConfidence.

Key Points:

• Expectations for growth are now negative for the first time in 2024.

Factors Contributing to Plunging Confidence

Several factors have contributed to the decline in business confidence. These include:

• Increased employer national insurance contributions

• Cuts to business rates relief

• The employment rights bill, which includes protection against unfair dismissal for employees from day one and a universal entitlement to sick pay from the first day of illness.

Impact on Businesses

The decline in business confidence is expected to have significant implications for businesses across various sectors. Some potential consequences include:

• Hiring freezes

• Job losses

• Reduced investment in business operations

• Decreased economic activity

Government Response

The government has been criticized for not engaging meaningfully with businesses on the measures outlined in the employment rights bill. Business leaders have expressed concerns that the package of policies will curtail their ability to invest, hire, and train staff.

Sources:

• The Institute of Directors: “Business confidence plummets to lowest level since pandemic”

• London Chamber of Commerce and Industry (LCCI): “Snap survey confirms business concerns over employment rights bill”