Business confidence weakens with fewer firms expecting sales to rise

Business confidence has weakened further, with companies cutting investment in reaction to tax rises and increasing labour costs, a leading survey has found.

Quarterly research from the British Chambers of Commerce, canvassing more than 4,600 businesses across the UK, also found that only 46 per cent of companies expected increased sales this year, the lowest level in three years. Twenty-four per cent believed their turnover would fall.

Both showed a declining trend on the BCC’s third-quarter survey, with the percentage of companies also reporting a fall in cashflow up from 29 per cent to 32 per cent.

The research was carried out between November 10 and December 8 — before and after the budget — with small and medium-sized businesses making up 91 per cent of those surveyed.

Tax rises remained their biggest concern, cited by 63 per cent of companies, while businesses said rising labour expenses, not helped by new employment legislation, were their main cost pressure. The increasing costs of employing workers were noted by 72 per cent of companies surveyed.

In response to persistent cost pressures, investment levels in plant, machinery and equipment were down for the fifth quarter on the trot. Twenty per cent of businesses said they were scaling back investment, with the most widespread cutbacks coming from the hospitality, retail and manufacturing sectors. About a third of companies in those sectors said they had taken an axe to their investment plans.

In a blow to the battle to control inflation, 52 per cent of businesses also said they expected to raise their prices in the next three months, up on the 44 per cent of the previous quarter.

David Bharier, head of research at the BCC, said: “Our data shows more clouds have gathered over business confidence and the outlook for SMEs [small and medium-sized enterprises] in 2026 is unsettled.

“Firms tell us they are worried about tax, struggling to invest and fear they’ll have to put their prices up in the months ahead. Firms’ confidence in their turnover growth has been stuck stubbornly below 50 per cent for the last 12 months.”

Retail and hospitality continued to be the weakest sectors, hit by both cost-of-living pressures and the chancellor raising payroll taxes and business rates. All types of companies said the marathon run-up to Rachel Reeves’s budget was damaging to confidence and investment.

“After a long period of uncertainty and speculation heading into the budget, concerns about major new tax rises eased somewhat in the aftermath,” Bharier said. “However, a budget fundamentally light on growth measures did little to boost business confidence and sentiment overall has worsened since the previous quarter.”