Research shows that UK business trust has dropped to its lowest level for more than two years amid rising taxes and growing concerns over Donald Trump’s escalating trade war.
Emphasizing the risks to the economy, the UK and Wales Institute of Certified Public Accountants (ICAEW) said the first quarter of the year was “disastrous” for UK businesses.
The accounting professional industry group said in a survey of 1,000 chartered accountants it found a sharp decline in business trust, supported by record high tax worries, rising cost pressures and slower sales expectations.
Its business trust metrics have been the weakest reading since the fourth quarter of 2022, falling to -3, down from 0.2 in the last three months of 2024. Reading 100 in the index means that all survey respondents are very confident about their future outlook, while -100 represents the opposite.
“We are a great place to go,” said Suren Till, director of economics at ICAEW. “These figures suggest that this year has been rather disastrous for the UK economy as it promotes anxiety over future sales performance this year, tax hikes that will distract us in April, and tariff anxiety in the US.”
Official figures released last week show that the UK economy surpassed expectations in February and continues to grow at 0.5% despite an increasingly dark background in businesses and consumers.
Business research showed employers had cut jobs at one of the fastest rates since the 2008 financial crisis, but official data shows a much more resilient photo. The latest job market figures are scheduled for Tuesday, but inflation figures are expected on Wednesday.
However, concerns are growing about the impact of Rachel Reeves’s rise in Employer National Insurance Contributions (NICS), announced in the £40 billion tax fall budget that came into effect on April 6th.
Trump’s blow from the world trade war is also expected to be hit by the UK economy. National Institute of Economic and Social Studies High US tariffs have warned that UK GDP growth could knock to zero next year.
More than half of poll companies (56%) say tax cuts are a growing challenge and a new record of the survey, which first began in 2004, according to ICAEW.
Financial markets forecast that, despite inflation remaining above the 2% target, the Bank of England should solidify interest rate cuts at its next policy meeting on May 8th.
“The mood music about the economy is getting more and more sour and future-looking indicators that weaken sales and employment activities can make things worse before they get better,” Till said.
