Plummeting confidence in businesses under Labour, due to increases in taxes and widespread economic pessimism reaches an all-time low.
In the UK, businesses are grappling with uncertainty and hostility from a government more focused on redistribution than growth. This uncertainty is causing mounting fears that the government's tax-first approach is strangling the private sector, the engine of economic recovery.
Recent surveys, such as the one conducted by the Institute of Directors (IoD), paint a grim picture of the economic outlook. In July 2025, economic confidence in the UK fell to its lowest ever level due to budget measures introduced by the Labour government. This confidence level was even lower than during the darkest days of the Covid pandemic.
The Lloyds Business Barometer found that British businesses are less confident, with overall confidence slipping two points to 37%. Confidence in business leaders' own businesses also nosedived to -9, down from +3 in June. This marks the fifth consecutive month of confidence decline, reaching the lowest levels since the Covid-19 pandemic.
The UK economy is experiencing a broader deterioration. GDP shrank in April and May, unemployment is climbing, and job vacancies are falling. Across the board, the data reveals an economy grappling with worsening conditions, including plummeting revenue expectations, collapsing investment intentions, job cuts suggested by sharp drops in headcount expectations, and falling export expectations.
Two-thirds of companies are urging for tax relief and support with the meta of employment. Almost 85% of business leaders surveyed believe Labour's policies will be unsuccessful in driving growth, with two-thirds (66%) saying they will be 'very unsuccessful.'
Cost expectations rose to +84, close to February's record high of +87, and wage expectations jumped from +40 to +65. Almost four in ten (39%) companies want relief on energy bills, and nearly half are demanding cuts to red tape.
Anna Leach, Chief Economist at the IoD, warned that the government must urgently quash rumors of further turbo tax rises for business this autumn and accelerate planning reforms and de-regulation to restore confidence and drive growth. Andrew Griffith, the Shadow Business Secretary, criticized Labour's approach, stating that they are attacking private enterprise with higher taxes, raised energy costs, and more trade-union inspired red tape.
Many business leaders are attributing the low confidence levels to the Labour government's tax and regulatory policies. The government has shown little willingness to control public expenditure, despite warnings from economists that further cuts or turbo tax rises of at least £20bn are necessary.
The three areas businesses most want action in are taxation, meta of employment, and regulatory burden. Mel Stride, the Shadow Chancellor, urged Chancellor Reeves to provide clarity and relief. The Economic Confidence Index of the IoD fell to an unprecedented -72 in July, surpassing the previous record low of -69 in April 2020. Only 8.1% of business leaders expressed optimism about the economic outlook, while 80.6% expressed pessimism.
Labour's £25bn tax raid on employers announced in October included a hike in National Insurance from 13.8% to 15% and a lowering of the earnings threshold, dragging more part-time workers into the tax net. Simultaneously, the national living wage was raised by 6.7%.
The government faces a backlash from the business community, feeling vilified rather than supported. If the government does not change course, the UK risks entering an extended period of economic stagnation.
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