UK Businesses Facing Challenging 2025

Business confidence shaky as Budget measures take effect  

In the first major survey of business sentiment in the UK since the Chancellor’s first budget in October, it appears that the measures introduced have hit confidence levels among the UK’s companies.  

The impact of the headline measure – a significant increase in employers’ National Insurance contribution – is already being felt, with 63% of businesses say tax, including national insurance, is now a concern, following the Chancellor’s Budget. That figure represents the highest level since 2017. 

Elsewhere, optimism generally is flat, with business confidence flatlining since the budget: just 49% of responding companies expect their turnover to increase over the next twelve months (compared with 56% in Q3), with confidence levels are lowest in the retail and hospitality sectors (39% and 42% respectively).  

Inflation remains a key concern, with a majority of firms (55%) saying they expect prices to go up in the next three months, mostly driven by labour costs; while only 1 in 5 of businesses saying they have increased investment in the past three months and 24% saying they have decreased it.  

The findings are important since they reflect the sentiment among mainly smaller businesses. Those SMEs, defined as firms with fewer than 250 employees, make up the majority of companies in the UK, and as such their concerns will make for worrying reading for the Chancellor. Considering that profitability confidence has also been hit, with 40% of firms expect profits to increase over the next year (48% in Q3) but 32% of businesses expect them to fall.  

Shevaun Haviland, Director General of the British Chambers of Commerce said, “The worrying reverberations of the Budget are clear to see in our survey data. Businesses confidence has slumped in a pressure cooker of rising costs and taxes.   

Firms of all shapes and sizes are telling us the national insurance hike is particularly damaging. Businesses are already cutting back on investment and say they will have to put up prices in the coming months. The Government is rightly coming up with long-term strategies on industry, infrastructure and trade. But those plans won’t help businesses struggling now.  

Haviland went on to say that business “Stands ready to work in partnership to make the proposed Employment Rights legislation work for all, but the current plans will add further costs on firms.  

“To help business we need to see quick action in three specific areas. Firstly, ministers should accelerate business rate reform to create a system that incentives investment.  

“We also need the Government to speed up infrastructure investment, to help SMEs in supply chains across the country. Finally, it’s crucial to support exports, prioritising a better trading deal with the European Union.  

“Without urgent Government action to ease the pain on businesses, the challenging economic landscape will get worse before it gets better.”  

Another report published this week – from KPMG – did at least offer some more encouraging news, forecasting that the pace of growth will pick up this year, with the economy growing by 1.7% compared with 0.8% in 2024. 

There’s no doubt that 2025 will be challenging for growing businesses. That’s why at Paul Beare Ltd we work closely with clients to ensure they have everything they need to chart a safe course. Whether that’s tax and payroll or accounting and banking, we have you covered.