UK businesses are grappling with what’s being described as a “harrowing” year, as confidence slumps in response to rising domestic tax burdens and mounting global trade tensions, according to new research from the Institute of Chartered Accountants in England and Wales (ICAEW).
The ICAEW’s closely watched business confidence monitor fell to minus 3 in the first quarter of 2025, down from 0.2 in the previous quarter, marking the lowest reading since late 2022. The drop reflects growing concern over the UK’s rising employer taxes, inflationary pressures and subdued domestic demand.
The downturn in sentiment follows the government’s recent decision to raise employer national insurance contributions by £25 billion—announced by Chancellor Rachel Reeves in October and implemented on 6 April. This came alongside a 6.7 per cent rise in the national living wage, further increasing labour costs for businesses already under pressure.
Employment growth has already slowed sharply ahead of the tax changes, with ICAEW data showing hiring levels at their weakest since mid-2021.
Adding to the unease is an escalating global trade row triggered by US President Donald Trump’s decision to impose sweeping new tariffs. Though he recently delayed the introduction of so-called “reciprocal tariffs” by 90 days, a blanket 10 per cent import duty remains in place, and a new 145 per cent tariff on Chinese goods has sparked retaliation from Beijing. China has since responded with its own 125 per cent levy on US imports, fuelling fears of a full-blown trade war.
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