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Highlights:
- Business confidence fell to a four-month low in October, impacted by potential tax increases in the upcoming Budget.
- Lloyds Banking Group’s business barometer dropped three points, signaling concerns about economic outlook and trading conditions.
- Despite this dip, 37% of surveyed firms still plan to increase hiring in the coming year.
Business confidence in the UK took a downturn in October, reaching its lowest level in four months, as concerns mounted around possible tax hikes in the forthcoming Budget. The latest business barometer from Lloyds Banking Group PLC (LSE:LLOY) revealed a three-point decline, with confidence levels dipping to 44. This drop marks a further shift from the nine-year high that was reached earlier in the summer, highlighting growing unease over the economic outlook.
The Lloyds survey pointed to a decrease in optimism about both the general economy and individual companies’ trading prospects. Chancellor Rachel Reeves is reportedly considering an increase in employer national insurance contributions in Wednesday’s Budget. This proposal has raised apprehension among businesses already navigating challenges in the post-pandemic economic landscape.
Increasing Tax Burden Casts a Shadow Over Optimism
This change in sentiment aligns with recent reports by GfK and S&P Global, which have similarly noted a waning in business confidence. Although many firms expressed intentions to expand hiring efforts in the coming year, the Lloyds survey data was collected before the national insurance hike was publicly anticipated. If implemented, the increase could reshape hiring plans and business strategies across the UK.
According to Hann-Ju Ho, an economist at Lloyds, “Although overall business confidence dipped in October, it follows a sustained period of significant optimism, and business sentiment remains above historical levels.” This tempered outlook reflects a cautious but steady resilience among UK businesses, who are looking beyond the near-term obstacles to consider long-term growth.
Businesses Weigh Growth Against Cost Pressures
While the survey recorded a net balance of 37% of businesses planning to hire more staff, sentiment around investment could be influenced by the upcoming Budget. With increased employer taxes, businesses might reconsider large-scale expansions and hiring as they adjust budgets for anticipated changes in operational costs.
As the government looks to balance fiscal requirements with economic growth, further changes could be on the horizon for UK businesses. Businesses will likely keep a close eye on the details of the Budget to evaluate how new policies will impact their strategies and bottom lines, underscoring a period of cautious adjustment as firms navigate the changing economic landscape.
