Tariffs and taxes dent business confidence

The latest Institute of Chartered Accountants in England and Wales (ICAEW) Business Confidence Monitor reveals a concerning shift in UK business sentiment. Confidence has fallen into negative territory for the first time in three years, largely due to global trade uncertainties and the increasing tax burden on businesses.

The Business Confidence Index now stands at -3.0 for Q1 2025, down from +0.2 in the previous quarter, marking the lowest level of confidence since 2022. Historically, such declines have mirrored challenging periods for the UK economy, including the inflationary pressures that followed major global events like Russia’s invasion of Ukraine.

Alan Vallance, ICAEW’s Chief Executive, aptly described the mood of many businesses, noting “a state of despondency among businesses as they stave off a blizzard of extra outlays, including the rise in National Insurance.” Vallance also highlighted the added uncertainty caused by recent international tariff announcements, which increase the likelihood of higher costs and economic disruption. 

Key survey findings include: 

• Tax burdens: 56% of businesses cited this as a key concern, marking a seven-fold increase as an issue over the past four years.  
• Regulatory burden is still seen as a key issue for over 50% of the sectors. 
• Sector disparities: Manufacturing and retail businesses were the least confident (-11.1 and -10.3), while IT, construction, and energy, water and mining sectors showed greater resilience (+6.9 to +10). IT, construction, and energy, water and mining have shown stronger confidence (ranging from +6.9 to +10) 
• Employment slowdown: Growth in employment fell to 1.2%, its lowest rate since 2021. 
• Regional variation: Businesses in the South East are less confident than their peers, having seen a steady decline over the past two quarters 
• Growth outlook: Domestic growth is expected to remain flat, though some businesses foresee improved international opportunities despite trade challenges. 

A manifesto for change

The ICAEW has outlined a seven-point manifesto aimed at building a more resilient, productive and globally competitive economy. It’s a vision we strongly support, and one we urge the next government to prioritise. The seven key areas for action are:

• Productivity: To make the UK the best place to start, run and grow a business 
• Skills: Improve access to training and skills for the workforce of tomorrow 
• Sustainability: Show global leadership on net zero and the green transition 
• Innovation: Build the standards and capability to lead on AI 
• Resilience: Ensure effective, transparent public administration 
• Trust: Improve corporate transparency to attract long-term investment 
• Trade: Develop trade and export policies that promote and encourage greater levels of international trade, particularly for SMEs. 

Navigating the challenges: How we can support your business

Businesses across the South East have shown remarkable resilience through Brexit, the pandemic, and ongoing economic uncertainty. However, the current climate of policy reversals and rising financial pressures has made long-term planning more challenging. 

To remain agile and competitive, businesses will need to: 

• Evaluate how tariffs impact supply chains, pricing and cash flow. 
• Undertake scenario planning to assess best- and worst-case outcomes. 
• Explore opportunities for recalibrating global supply chains or pricing strategies. 
• Consider strategic M&A activities to mitigate trade costs and enhance resilience.

As part of the Kreston Global network, we are uniquely positioned to help businesses navigate these complexities. Whether modelling financial impacts, restructuring supply chains, or exploring cross-border efficiencies, our team can provide tailored advice to support your next steps.

If you would like any advice on navigating these changes, please do not hesitate to get in touch. You can also read the ICAEW’s business confidence monitor here.