The UK’s private sector was left in a state of “limbo” amid months of Budget speculation leading to delayed investment plans, a leading survey has found, underscoring claims that the government misled the public and businesses over tax rises and fiscal constraints.
The Confederation of British Industry (CBI)’s monthly private sector survey has revealed how businesses expected activity to fall over the next three months, with data being collected before the Budget took place.
The composite value for expected activity across the private sector in the next three months dropped to -27 in November, compared to -20 in the two previous months, with researchers suggesting that mounting tax fears weighed on investment decisions.
It extended a run of negative readings for the weighted balance score. The first negative result in the sequence came in October last year, the month of Rachel Reeves’ first Budget.
Activity falls as fastest pace in five years
The survey of around 900 companies also suggested that private sector activity had fallen at the fastest pace since August 2020, with all sub-sectors in the data reporting a drop in output.
CBI deputy chief economist Alpesh Paleja said the latest downturn in confidence could be put down to “jitters” before the Budget, with speculation around taxes putting bosses off spending and hiring decisions.
“Growth expectations weakened in November, some of which may be down to jitters ahead of last week’s Budget,” Paleja said.
“Businesses tell us that much of the month passed in limbo ahead of that, with big discretionary spending and investment on hold.
“While last week’s Budget is likely to add further costs to businesses, notably with the addition of national insurance contributions (NICs) to salary sacrifice pension contributions, the fiscal headroom [of £21.7bn] created may provide some stability going forward.”
Meanwhile, WPI Strategy’s latest Business Confidence Barometer, conducted after the Budget, found that a majority of business leaders (56 per cent) say it is likely there will be fewer hires than previously planned because of the Budget with a third reporting it is likely that their company will suffer as a result of the new fiscal landscape.
WPI polled 500 business leaders in the aftermath of the Budget, with the consultancy’s Chief Economist, Martin Beck, saying the findings “reinforce the sense that the Budget has done little or nothing to jump-start growth.”
He added: “Eight in ten businesses say it will have either a negative or no impact on their operations, suggesting that already-low expectations haven’t fallen much further, but they haven’t improved either.”
Budget rumours spooked house buyers
Further criticism of pre-Budget speculation has highlighted the significance of anonymous government briefings issued to media outlets.
Reports widely suggested that the Chancellor would have to plug a £30bn fiscal hole in public finances, prompting businesses to fear another wave of taxes would hit them after last year’s Budget added costs to payroll budgets.
Given the OBR revealed Reeves’ headroom had not been entirely wiped out after forecasts were shared with the Treasury on 20 October, the Chancellor has been accused of misleading the public in early November over suggestions she was being compelled to break manifesto commitments to raise revenue and plug a large fiscal hole.
Both Keir Starmer and Reeves have denied that they misled the public over pre-Budget briefings on the state of public finances.
The government has faced intense criticism over speculation leading up to the Budget, with the Bank of England stating that tax rumours had stunted growth in the third quarter of the year.
The Bank also revealed on Monday that net borrowing of mortgage debt dropped to £4.3bn in October while mortgage approvals declined to 65,000 in the month, the lowest level since February 2025.
RBC Capital Markets analyst Anthony Codling said the drop in approvals, which was nearly five per cent below levels seen at the same time last year, confirmed that the “the long period of Budget speculation negatively impacted housing market activity”.