UK companies are feeling bruised – and are not ready for another battering from Reeves
The UK’s largest business sentiment survey before next month’s Budget shows most firms remain bruised, with no improvement to business sentiment.
The British Chambers of Commerce (BCC) Quarterly Economic Survey for Q3 has found that confidence and investment levels remain at 2022 levels.
Less than half of responding firms (48%) are expecting increased turnover in the next 12 months, while 21% expect a decrease. Meanwhile, only 21% have increased investment, and 25% have scaled back plans.
The data also shows that tax remains the biggest concern for businesses alongside increased worries over inflation.
The survey was carried out by the BCC Insights Unit and the UK-wide Chamber network, with the fieldwork conducted between 18 August and 15 September. Over 4,600 businesses across the UK (91% of whom are SMEs) responded online.
Confidence among business remains flat, with only 48% of responding firms expecting their turnover to increase over the next 12 months. That compares with 49% in Q2 and 58% before the 2024 Budget. A fifth (21%) of businesses expect turnover to worsen and 32% expect no change.
The data show wide sectoral disparities. Only 35% of retailers expect increased turnover in the next 12 months (44% in Q2), while the figure in the hospitality sector is 38% (33% in Q2).
Tax is a key concern
Following the employer National Insurance Contributions (NICs) rise in April, tax continues to be the biggest concern for businesses. 59% cite tax as a worry, up from 56% in Q2. Before last year’s Budget, only 36% cited tax as a concern (Q2 2024).
There has been a sharp rise in concern about inflation, cited by 57% of firms (52% in Q2), the highest level since the start of 2024. Worries about interest rates remain at relatively low levels – cited by a quarter of responding businesses (25%).
With businesses facing increased cost pressures, investment levels continue to suffer. A quarter of businesses (25%) say they have cut back on investment plans (broadly similar to 24% in Q2). The majority of firms, 54%, say their investment strategy has remained the same, while 21% have increased their plans.
The issue is more marked in certain sectors, with over a third of hospitality firms (35%) scaling back investment plans (39% in Q2). While the figure for those in the retail sector is 30%.
A clear message from businesses
“Ahead of the Chancellor’s statement next month, our survey shows many firms remain bruised and are not ready for another Budget battering,” said David Bharier, Head of Research at the British Chambers of Commerce.
The research reveals no clear improvements to key indicators we track. For twelve months, SMEs have told us the same story: rising costs, weak investment, and little sense of relief on the horizon, he said.
“The Employer NICs increase has been the most widely cited source of pressure, hitting investment and pushing up prices. The proportion of businesses expecting to raise prices remains worryingly high, driven primarily by labour costs.
“Inflation now sits alongside taxation as a top concern. The global shift towards protectionism and tariffs has also been a major compounding factor.”
Bharier noted that persistent weak sentiment this quarter may suggest that many firms have already priced in a tough Budget. But further surprise measures that hit business, like those seen in 2024, could drive confidence even lower.
“What businesses need now is certainty and a long-term strategy, not more ad hoc policy shifts. The AI revolution could be a real productivity game changer and our recent research shows that more SMEs are adopting it, but firms need the space to invest and adapt if the UK is to seize the opportunity.
“Our message to the Chancellor ahead of the Budget is clear – no further tax rises on business. SMEs are calling for urgent action to tackle skills shortages, a bold push to boost exports, and more investment in infrastructure. Without that, confidence could deteriorate further, putting economic growth at risk.”
