Confidence slumps over fears of tax hikes from Reeves in November
The latest national Business Confidence shows that business sentiment deteriorated further into negative territory in Q3 2025 on the back of concerns around the upcoming budget.
The survey, which is conducted by the Institute of Chartered Accountants in England and Wales (ICAEW), shows the increased pessimism is underpinned by elevated concern over the tax burden as well as above-average inflation, and weak domestic and export sales growth eroding businesses’ profit margins.
The survey results are based on 1,000 telephone interviews among ICAEW Chartered Accountants covering a range of UK sectors, regions and company sizes, ensuring a representative picture of the UK economy. The latest quarterly findings are based on the period 14 July to 24 September 2025.
The Business Confidence Index dropped to -7.3 in Q3 2025 from -4.2 in Q2 2025, with sentiment falling for the fifth consecutive quarter. The further drop in confidence coincides with another rise in concern about the tax burden, reaching a new survey record high (60%) ahead of the forthcoming government Budget in November.
Confidence is at its lowest level since Q4 2022 and remains well below the historical average (+4.9).
Alongside concerns about the tax burden, domestic sales growth was flat compared to the previous quarter, with businesses reporting growth of 3.0% in Q3 2025, matching the rate in Q2 2025 and remaining below the historical norm (3.1%).
Businesses are increasingly concerned about domestic conditions and have been revising down their projections for future domestic sales growth over recent quarters. In Q3 2025, companies projected growth of 4.0% for the year ahead, marginally down from the previous quarter (4.1%) but significantly lower than projections of 5.1% from only a year ago.
Likely as a direct result of US tariffs, exports sales growth slowed to just 2.4% in Q3 2025, the lowest rate reported since Q4 2023 and below the historical average (3.0%). With various trade deals progressing, including with the US and EU, businesses appear a little more optimistic about future exports prospects, predicting growth of 3.6% for the next 12 months, up slightly from the previous projection of 3.5%.
Decline across sectors
Sentiment fell in most sectors in Q3 2025, but the fall was both the largest and most significant in Property which, with a score of -23.2, is the least confident sector.
It is likely that a combination of tax and regulatory concerns, and dampened profits growth following tax rises and a weak housing market are all contributing to the slump in sentiment in the sector.
Confidence in Retail & Wholesale (-11.4) also remains in deep negative territory, with the sector facing higher business costs following April’s tax rises, weak consumer confidence and cautious spending.
Energy, Water & Mining (+21.2) is the most confident sector in Q3 2025, following a sharp rise in the index from -2.0 recorded last quarter. Strong export sales growth and greater certainty over future energy policy and investment ‒ with a new commitment to renewable energy projects announced in September ‒ are believed to underpin the relative optimism in the sector.
Manufacturing & Engineering is the only other sector to report a rise in confidence in the quarter although, at -3.6, its score remains in negative territory. It is likely that progress on trade deals eased some of the concerns about future exports growth potential, contributing to the improved sentiment in the sector.
Meanwhile, Construction (+1.4) is the only other sector that reported a positive score in Q3 2025, but confidence has been ebbing away over recent quarters and dropped below the sector norm (+3.8) this quarter, amid survey record high concerns about the tax burden and slowing profits growth.
