UK business confidence hits 3-year low
British businesses were the most pessimistic in over three years at the start of 2026, as sentiment worsened following Chancellor Rachel Reeves’ Budget.
This is according to new data from the Institute of Chartered Accountants in England and Wales (ICAEW) and is based on a telephone survey of 1,000 accountants between 8 October and 11 December.
The results show that business confidence fell to -11.1 in Q4 2026, down from -7.3 in the previous quarter. This means that confidence has now fallen for six quarters in a row.
A record 64% of firms said tax was a growing challenge, more than double the share at the time of the 2024 election; Half of businesses worried about regulation, the highest proportion for more than seven years, reflecting concerns over new employment rights legislation.
On a more positive note, indicators of sales activity in the months ahead improved.
The reports come after UK manufacturers warned this week hat a combination of restricting tax relief on salary sacrifice for pensions and National Living Wage increases could have long-term ramifications – especially on the country’s job market.
“Currently, employees can contribute unlimited amounts to their pension via salary sacrifice without incurring National Insurance contributions (NICs). From April 2029, only the first £2,000 of sacrificed contributions will remain NICs exempt, with any excess subject to both employee and employer NICs,” the group said.
“Though this change is three years away, it will significantly impact businesses offering enhanced pensions as an employee benefit. Coupled with the planned increase to the Living Wage (up 4.1% to £12.71 per hour from April 2026) and the previous Budget’s rise in employer NICs, these factors will squeeze margins and could further slow hiring.”
