Investment by British Businesses Falls to Lowest Since Pandemic

By the Editorial Team · Tuesday, July 7, 2026

Investment intentions among British businesses fell to their lowest level since the pandemic, with only 17% planning to increase spending in Q2 2026 due to rising costs and tax pressures. This decline signals growing caution among firms amid inflation, higher national insurance contributions, and geopolitical risks, raising concerns about the UK's economic growth prospects.

Investment by British businesses has declined to its lowest level since the COVID-19 pandemic, with firms citing increased tax burdens and rising costs as key challenges. According to the latest survey from the British Chambers of Commerce (BCC), only 17% of companies planned to increase investment in the second quarter of 2026, down from 21% in the first quarter.

The survey, which reflects sentiment across a broad range of sectors, also found a drop in confidence during the three months ending in June. Inflation returned as a major concern, while less than one-third of businesses reported increased sales. The rise in energy prices, driven in part by ongoing conflict in Iran, contributed to heightened operational costs for many firms.

Fiscal policy remains a significant issue, with firms still feeling the effects of higher national insurance contributions introduced in the 2024 Budget under Chancellor Rachel Reeves. David Bharier, deputy director of economics and insight at the BCC, described the policy environment as more of a risk than an opportunity for businesses. He emphasized the lasting impact of increased employer national insurance payments, which have been affecting companies for nearly two years. Bharier suggested that simplifying administrative requirements and reducing costs could help create conditions more favorable to growth.

The survey highlighted sector-specific struggles, particularly in retail and hospitality. Within hospitality, fewer than 30% of firms expected turnover to rise, while 33% anticipated a decline. Retailers reported similar concerns, with 32% forecasting lower sales. Overall, only 44% of companies projected improved turnover over the next year, down from 49% earlier in 2026, and 23% expected sales declines.

A small services firm based in Yorkshire encapsulated the sentiment of many, describing itself as being “taxed out of existence,” reflecting mounting financial pressures. Bharier pointed to a broader pattern in which no single event explains the downturn in investment sentiment. Instead, he attributed the trend to cumulative cost pressures, geopolitical instability, and a resulting cautious approach among small and medium-sized enterprises (SMEs).

Bharier called on the government to introduce a clear growth delivery framework and prioritize measures to stimulate private sector investment. He noted that while firms have not lost ambition, ongoing external shocks and sustained financial strains have fostered a more defensive stance among businesses.

The findings underscore the challenges facing the UK economy as it grapples with inflationary pressures and the fallout from recent fiscal policies, raising questions about the outlook for business investment and growth in the months ahead.

This article was reported by synthesizing coverage from multiple independent news outlets to present a balanced, unbiased account. Read about our editorial standards. Spotted an error? Let us know.