UK business confidence has fallen to its lowest level in three years, highlighting growing unease among firms as concerns over tax, regulation and economic growth continue to mount,

according to a new survey.

British companies became increasingly pessimistic toward the end of 2025, with sentiment deteriorating further after Chancellor Rachel Reeves delivered her budget in late November. Data published on Wednesday by the Institute of Chartered Accountants in England and Wales (ICAEW) showed its Business Confidence Index dropped to -11.1 in the fourth quarter, down from -7.3 in the previous quarter. This marks the weakest reading since the end of 2022.

Confidence declined steadily between September and December. The index slipped from -10.7 before the November 26 budget to an even lower final reading, underlining the negative reaction among businesses following the fiscal announcement.

The findings echo signals from other surveys. Last week, the closely watched S&P Purchasing Managers’ Index reported only a modest improvement in business sentiment in December, falling short of earlier estimates that suggested a stronger rebound once budget uncertainty had eased.

Reeves’ budget outlined £26 billion ($35 billion) in tax increases, though most of the measures were deferred. Employers were also spared the kind of immediate impact seen in her first budget in 2024, when a rise in payroll taxes weighed heavily on firms. Despite this restraint, confidence still faltered.

Both Reeves and Prime Minister Keir Starmer have pledged to revive Britain’s sluggish economic growth, arguing that stable conditions and policy clarity will help unlock greater business investment. However, the latest data suggest many firms remain unconvinced.

The ICAEW survey revealed several notable trends:

- Business confidence has now fallen for six consecutive quarters.

- A record 64% of companies said taxation is an increasing challenge—more than double the level recorded around the 2024 general election.

- Half of businesses cited regulation as a growing concern, the highest share in more than seven years, reflecting anxiety over new employment rights legislation.

- Confidence among export-focused firms improved, indicating that domestic policy issues are largely driving the broader downturn.

- Expectations for future sales activity strengthened, offering a rare note of optimism amid the gloom.

The survey was conducted by telephone between October 8 and December 11 and included responses from 1,000 accountants across the UK. Photo by Phil Whitehouse, Wikimedia commons.