Business confidence in the United Kingdom has declined amid rising costs and economic uncertainty, according to a recent report from the Institute of Directors (IoD). The report showed that the IoD’s September confidence index fell to minus 54, down from minus 49 in August, reflecting growing unease in the private sector.
The report highlights significant cost pressures endured by businesses, including increased National Insurance contributions, a rise in the minimum wage, and new workers’ rights. Additionally, global factors such as heightened geopolitical tensions linked to Donald Trump’s conflict with Iran have driven up oil and gas prices. Domestic policies aimed at achieving net zero emissions have also contributed to rising energy levies, further squeezing corporate margins.
Anna Leach, the IoD’s chief economist, described the situation as firms having to “run to stand still,” noting that investment and hiring intentions remain subdued amid the challenging environment. She emphasized the importance of government intervention to ease these pressures ahead of the upcoming Budget, specifically urging Chancellor John Healey to provide clearer cost certainty and measures to improve the economics of investing and hiring, with a particular focus on addressing high energy costs.
Further underlining the cautious mood in the business sector, data from professional services firm EY indicated a slowdown in corporate borrowing growth, projected to moderate to 2.1 percent this year from 5.3 percent in 2025. Martina Keane, EY’s UK and Ireland financial services leader, attributed this trend to ongoing geopolitical tensions contributing to broader market uncertainty.
Despite these concerns, revised figures from the Office for National Statistics (ONS) painted a more positive picture of the broader economy. The ONS reported that gross domestic product (GDP) grew by 0.5 percent in the second quarter, an upward revision from an earlier estimate of 0.4 percent. However, GDP growth for the previous year was slightly adjusted downward, from 1.3 percent to 1.2 percent.
Economist Valentin Boboc of the Institute of Economic Affairs (IEA), a free-market think tank, welcomed the revised growth figures but cautioned that the government should focus on reducing the regulatory and tax burdens on businesses and workers. He warned against further tax increases, suggesting they could impede the economic growth necessary for the government’s fiscal goals.
As the UK government prepares its Budget, businesses and economists alike are calling for policies that balance growth ambitions with the realities of rising operating costs and global uncertainties.