Business confidence in the UK has fallen to its lowest level since the general election, with businesses increasingly pessimistic about the economic outlook.
Lloyds Bank's latest economic barometer shows business optimism rose this month in June, amid fears that the Labor government's warning of a tough budget in October is having a negative impact on the economy. It was found that the price had fallen to the lowest level since then.
Business optimism had reached an eight-year high in July and August following strong economic growth in the first half of 2024. However, in the latest survey conducted by Lloyds in the first half of September, that confidence fell by three points to 47%. Although this was the lowest level in three months, it remains above the long-term average of 29%.
The decline was due to growing concerns about the economy, with 57% of businesses feeling confident, while 19% were less positive. This resulted in a 9 point drop in net economic optimism to 38%, the lowest since March.
Han Joo Ho, senior economist at Lloyds Bank Commercial Banking, said: “Overall confidence has fallen this month, but that decline is from an eight-year high, with businesses still worried about their “We are positive about the trading outlook.”
“There are further complications with economic optimism, with some companies indicating that they maintain some degree of caution. We still expect the economy to expand, but the pace is slowing until 2024. It may be slower than in the first half of the year,” Ho warned.
Chancellor Rachel Reeves has already said October's budget will require “difficult decisions on tax, spending and welfare”, while potentially relaxing self-imposed fiscal rules imposed by the government to prioritize investment. It also hinted at sexuality.
Last week, the Employment Confederation reported that employer confidence in jobs had fallen sharply in August, while the British Retail Consortium revealed that consumer confidence had fallen sharply in September. did.
A separate survey released by KPMG on Monday found that three-quarters of financial services leaders expect the budget to have at least a moderate impact on their business.
More than a quarter of bosses surveyed in the banking, insurance, wealth management and private equity sectors expect a significant impact, according to KPMG's latest UK Financial Services Sentiment Survey.
Almost a third of leaders expect the biggest impact to be from sectoral tax increases such as banking levies. More than a quarter expect an impact on payroll costs, while 19% say non-domestic tax changes will impact their business.
Karim Haji, head of global and UK financial services at KPMG, said: “Leaders in the sector are preparing for this Budget to have a huge impact on their businesses.”
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“While there are notable expectations for sectoral tax increases, leaders will hope for a subsequent period of stability to ensure that the current tax regime for financial services remains competitive,” Haji said.
British banks, which have made huge profits in recent years thanks to rising interest rates, are lobbying the government not to increase taxes on the sector.
Last week, Mr Reeves announced that Mr Reeves, a non-resident member of Labour's party, was asked by the Office for Budget Responsibility (OBR), amid growing concerns within the Treasury that the plan would not raise any money at all and could encourage wealthy foreigners to raise it. It has become clear that the government is reconsidering some of its crackdowns on the super-rich. leave the UK.
KPMG revealed that management believes inflation pressures will be the biggest challenge for the rest of the year, followed by interest rates. However, we remain optimistic about our business growth and profitability outlook for Q4 2024.
“While leaders remain optimistic about the economic outlook, the knock-on effects of the economic turmoil continue to weigh on businesses,” Haji said.
“Leaders are grappling with a myriad of challenges, but it is easy to see how more pressing, home-grown issues can undermine issues that pose greater long-term threats to business, such as ESG and technological advances. I understand.”
