LONDON – British businesses turned their most pessimistic in three years at the end of 2025, and sentiment worsened after Finance Minister Rachel Reeves’ November budget, according to a survey published on Wednesday by the Institute of Chartered Accountants in England and Wales (ICAEW).

The ICAEW’s business confidence gauge fell to -11.1 in the fourth quarter of 2025, its lowest reading since the end of 2022, down from -7.3 in the third quarter. The decline highlights growing concerns among UK businesses over taxation, regulation, and the pace of economic growth.

Impact of the November Budget

Confidence slipped across the September-to-December period, falling slightly from -10.7 before Reeves’ budget on November 26 to its final reading, 0.4 points lower. The finance minister had announced £26 billion ($35 billion) in tax increases, though most were delayed and employers were spared the payroll tax hikes introduced in her first 2024 budget.

Despite these measures, the survey suggests that businesses remain cautious, particularly regarding the broader economic environment and government policy stability.

Key Findings from the ICAEW Survey

The ICAEW survey, which polled 1,000 accountants via telephone between October 8 and December 11, revealed several notable trends:

• Business confidence has fallen for six consecutive quarters, reflecting ongoing uncertainty.
• A record 64% of firms reported that taxation is a growing challenge, more than double the share at the 2024 election.
• Regulatory concerns are at a seven-year high, with half of businesses citing worries about new employment rights legislation.
• Confidence among exporting businesses rose, suggesting that domestic factors, rather than international demand, were driving the overall decline.
• Indicators for sales activity in the months ahead showed modest improvement, providing a glimmer of optimism.

Broader Economic Context

Last week, the S&P Purchasing Managers’ Index (PMI) reported only a marginal rise in business sentiment in December, contrasting with earlier forecasts of a stronger recovery following budget-related uncertainty. The findings suggest that UK businesses remain cautious despite policy measures aimed at stimulating growth.

Finance Minister Reeves, along with Prime Minister Keir Starmer, has emphasized efforts to accelerate the country’s slow economic growth and create conditions to encourage business investment. However, rising concerns over taxation and regulation may continue to weigh on confidence in the near term.

Outlook for UK Businesses

Economists note that the sustained drop in confidence could influence investment decisions, hiring plans, and domestic spending. While exporters appear less affected, domestic-focused businesses are grappling with tax pressures and regulatory changes, making the next quarter critical for assessing the trajectory of the British economy.

The ICAEW survey underscores the delicate balance policymakers face in supporting economic growth while managing fiscal responsibilities and regulatory frameworks.