UK Business Confidence Crashes to Two-Year Low Amid Tax Hikes and US Trade Tensions

UK businesses are facing a sharp crisis of confidence as new data reveals sentiment has plummeted to its lowest level in over two years, battered by steep tax hikes and mounting fears over Donald Trump’s revived global trade war.
According to a survey by the Institute of Chartered Accountants in England and Wales (ICAEW), the first quarter of 2025 has been described as “harrowing” for companies across the country. The institute’s index of business confidence nosedived to -3, down from 0.2 at the end of 2024 — the weakest performance since Q4 2022.
The findings, based on responses from 1,000 chartered accountants, underscore growing unease in boardrooms nationwide. Concerns over record-high taxation, slowing domestic demand, rising cost pressures, and deteriorating global trade relations are casting long shadows over the UK’s economic outlook.
Suren Thiru, ICAEW’s economics director, said: “This year has opened on an ominous note for the UK economy. Anxiety around future sales, a punishing tax environment, and the looming impact of aggressive US tariffs are choking business optimism.”
This comes despite official figures showing an unexpected 0.5% GDP growth in February, driven by resilient consumer spending. However, that uptick masks deeper structural concerns. Private business surveys have flagged a steep decline in employment confidence, with job shedding at levels not seen since the 2008 financial crash — a contrast to the still-holding official labour market statistics, due for update today.
The most contentious economic development has been Chancellor Rachel Reeves’s £40bn tax package, which took effect on April 6. Particularly unpopular is the increase in employer national insurance contributions, which firms say is straining payroll budgets at a critical time.
External shocks are compounding the pressure. The re-emergence of Donald Trump’s trade protectionism — with sweeping tariffs targeting key global partners — is expected to hit UK exports and economic growth. The National Institute of Economic and Social Research (NIESR) warns that Britain’s GDP could flatline in 2026 if trade tensions continue to escalate.
More than half (56%) of businesses surveyed by ICAEW cited tax increases as a major concern — the highest figure since the survey began in 2004. Expectations for domestic sales growth have also fallen to their lowest since mid-2022, further dimming short-term hopes for a rebound.
With inflation still hovering above the Bank of England’s 2% target and monetary policy under scrutiny, financial markets are increasingly betting on a rate cut at the BoE’s upcoming meeting on 8 May.
“The mood music around the UK economy is turning bleak,” Thiru added. “If the forward indicators are anything to go by, we may be heading toward tougher times before we see recovery.”