Business optimism fell at its fastest pace in over three years following October’s Budget, a new survey shows.
BDO’s latest business trends survey, which collects and regroups data from the UK’s main business surveys, showed that corporate confidence fell to its lowest level since January 2023.
The optimism index dropped 5.8 points to 93.49 in November, which was the largest monthly fall since August 2021.
The drop in confidence reflects the anticipated effect of the Budget, as businesses brace for the impact of the national insurance hike and the increase to the minimum wage from April next year.
Chancellor Rachel Reeves increased the rate of employers’ national insurance by 1.2 per cent in the Budget while also cutting the threshold at which firms have to start paying the levy.
Businesses have warned that this will force them to slash investment budgets and cut jobs in order to deal with the extra costs.
“The drop in business confidence this month is not a surprise given the significant challenges they continue to face,” Kaley Crossthwaite, a partner at BDO said.
BDO’s output index, meanwhile, slumped to its lowest level since October 2023 as firms suffered from lower customer confidence.
This meant the index fell into contractionary territory for the first time this year. The survey suggests the economy has essentially come to a standstill as the end of the year approaches.
In the first half of the year, the UK was among the fastest growing major economies in the world, but momentum has slowed in recent months. The economy grew just 0.1 per cent in the third quarter, down from 0.5 per cent in the quarter before.
The slowdown was widely anticipated by economists, but a number of commentators still think that uncertainty in the run-up to the Budget weighed on momentum.
Economists expect growth to pick up next year, fuelled by public spending, but there is a great deal of uncertainty about how sustainable the acceleration will prove.