Confidence among businesses plummeting to historic lows due to harsh tax policies by Reeves, drawing widespread criticism.
The economic sentiment among UK businesses has taken a significant hit, with the Institute of Directors (IoD) reporting that business directors' confidence in the economy has plunged to historic lows. According to an IoD survey conducted in July 2025, the economic sentiment index stands at -72, the worst since the IoD began tracking in 2016.
This sharp decline in confidence comes amidst widespread skepticism about the Labour government led by Prime Minister Keir Starmer and Chancellor Rachel Reeves, who took office in early July 2025. The survey found that nearly 85% of 900 business leaders expressed a lack of confidence in the government's ability to stimulate economic growth, with more than two-thirds describing its economic policies as "very unsuccessful" so far.
The negativity also stems from concerns over structural challenges and rising costs. Andrew Griffith, the Shadow Business Secretary, stated that the gloomy results in the IoD's survey did not come as a surprise, given Labour's perceived attacks on private enterprise. He added that businesses faced a summer of uncertainty followed by massive tax hikes last year, and the Chancellor seems determined to release a sequel.
Chancellor Rachel Reeves' tax hikes, particularly increased corporate taxes to fund social and infrastructure initiatives, have been heavily criticized. Many executives say these tax rises add pressure to struggling firms, and the overall tax burden remains a top growing concern among businesses, reaching near survey-high levels in mid-2025.
The IoD survey also revealed that firms signaled their worries about higher costs hitting profit margins. Export expectations also fell into negative numbers in July, and more firms became pessimistic about headcount expectations. The top area businesses want to see government action is in taxation, reducing the cost of employment, and slashing red tape.
Anna Leach, the IoD's chief economist, stated that UK business leaders are battling with immediate cost increases due to a £20bn tax raid on employment last autumn. She also mentioned that damaging speculation around tax rises in the lead-up to the 2024 Budget caused firms to pause investment and hiring decisions.
Despite more positive readings on business confidence from Lloyds Bank, which focuses on businesses with turnover higher than £250,000, the overall picture painted by the IoD survey is one of uncertainty and pessimism. With business directors' confidence in the UK economy at an all-time low, it remains to be seen how the government will address these concerns and work towards restoring business confidence.
[1] Institute of Directors (IoD), July 2025 Business Confidence Survey [2] Lloyds Bank Business Barometer, July 2025 [3] Financial Times, "UK Business Confidence Plummets to Record Low", July 2025 [4] BBC News, "IoD Survey: UK Business Confidence at Record Low", July 2025
- The economic policies of the Labour government, led by Prime Minister Keir Starmer and Chancellor Rachel Reeves, have been described as very unsuccessful by more than two-thirds of business leaders in a survey conducted by the Institute of Directors (IoD) in July 2025.
- Business directors' confidence in the UK economy has plunged to historic lows, according to the IoD's July 2025 Business Confidence Survey, with the economic sentiment index standing at -72, the worst since the IoD began tracking in 2016.
- Many executives have heavily criticized Chancellor Rachel Reeves' tax hikes, particularly increased corporate taxes to fund social and infrastructure initiatives, as adding pressure to struggling firms and increasing the overall tax burden, which remains a top growing concern among businesses.
- UK business leaders are battling with immediate cost increases due to a £20bn tax raid on employment last autumn, according to Anna Leach, the IoD's chief economist, who also mentioned that damaging speculation around tax rises in the lead-up to the 2024 Budget caused firms to pause investment and hiring decisions.
