British Business Confidence Drops Amid Tax Concerns

By Suban Abdulla

LONDON (Reuters) – British business confidence fell in the third quarter as tax worries hit investment, according to a survey of accountants that aligns with similar concerns from other business groups ahead of the new Labour government's first budget.

The Institute of Chartered Accountants in England and Wales (ICAEW) reported on Wednesday that its quarterly Business Confidence Monitor dropped to 14.4 in the three months to September, marking the first decline in a year, down from 16.7 in the previous quarter.

> "The findings show that businesses are troubled by the tax burden and increasingly reluctant to invest," said ICAEW chief executive Alan Vallance.

Finance Minister Rachel Reeves has cautioned that taxes may need to increase in her budget on Oct. 30, following her discovery of a £22 billion ($29 billion) gap left in this year’s public finances by the prior Conservative government.

The ICAEW noted that 29% of companies cited the tax burden as a growing challenge, the joint highest in the survey since it began in 2004, significantly above the average of 16%.

A separate survey from the British Chambers of Commerce showed a further decline in business morale due to concerns over the budget's impact on tax levels.

The government has ruled out hikes to income tax, corporation tax, value-added tax, and National Insurance contributions. However, businesses remain apprehensive about possible increases in other taxes, such as capital gains tax.

Firms have slightly reduced their plans for capital investment. According to the ICAEW survey, businesses are planning a 1.9% increase in investment over the next 12 months, down from 2.1%.

Prime Minister Keir Starmer is set to host an international investment summit on Oct. 14, aimed at boosting foreign direct investment to enhance economic growth—one of his main objectives since taking office in July.

> "As the UK prepares to host a major investment summit, and speculation mounts ahead of a challenging budget, the chancellor must provide companies with the certainty and stability they need," emphasized Vallance.

"Reforms to VAT and business rates, alongside public and private investment could help achieve this."

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