British business confidence slumped over the first three months of the year, as bosses entered “a state of despondency” over rising taxes combined with the threat of US trade tariffs.
A poll by the Institute of Chartered Accountants in England and Wales (ICAEW) indicated that confidence is at its lowest point since late 2022, when inflation was surging amid the energy crisis and Liz Truss’s mini-Budget.
More than half of companies polled in the ICAEW’s most recent survey, 56% of respondents, said taxes were a mounting challenge, an all-time high figure.
Alan Vallance, the Institute’s chief executive, said: “These findings reveal a state of despondency among businesses as they stave off a blizzard of extra outlays, including the rise in national insurance.
“Meanwhile, the US tariff announcements have loaded on exceptional uncertainty and the very real prospect of higher costs and global economic woes.
“Tax worries have never been so prominent, causing record levels of distress for our members for the second quarter running.”
The ICAEW’s business confidence monitor, which produces a so-called index score from its quarterly surveys, came in at minus 3, the weakest reading since the fourth quarter of 2022 and down from 0.2 in the previous poll.
The survey comes after weeks of uncertainty over what US President Donald Trump’s tariffs will mean for UK firms.
After a chaotic few days following the announcement of worldwide so-called reciprocal import tariffs, Mr Trump rolled back the measures to include a baseline of a 10% levy for most countries, including the UK.
Meanwhile, employer national insurance contributions (Nics) rose in April at the same time as growing utility bills and an increase in the minimum wage.
And weak economic growth over recent months led firms to project that domestic sales growth would hit its lowest level this year since the second half of 2022, the ICAEW said, despite a slight uptick in sales across those surveyed in the opening months of this year.
Recent figures from the Office for National Statistics (ONS) showed gross domestic product (GDP) grew by 0.5% in February.
But that was a surprise leap after the economy flatlined in January, with GDP showing no growth in the first month of the year.
Suren Thiru, ICAEW economics director, added: “These figures suggest that this year has so far been a pretty harrowing one for the UK economy as accelerating anxiety over future sales performance, April’s eye-watering tax hike and US tariffs helped push business sentiment into ominous territory.
“Our data suggests that firms are currently responding to intensifying cost pressures with only limited price rises, but at the expense of more restrained recruitment and weaker spending on staff training, which will hinder productivity.”
The ONS will release its next monthly report on the UK’s jobs market on Tuesday, while the most recent inflation data is due on Wednesday.
