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Economic confidence reaches historic low amid tax worries

Business leaders express deep concern over rising costs and anticipated tax increases.

July 31, 2025 at 08:00 PM

Economic confidence falls to record low as tax rises loom

Recent data shows a significant decline in business confidence as tax rises are anticipated.

Economic confidence hits all-time low ahead of potential tax hikes

A recent report from the Institute of Directors reveals a drastic drop in business confidence in the UK, now at its lowest since the Brexit referendum. The Business Confidence Index fell to -72 in July from -53 in June, indicating widespread concerns over potential tax increases and the effects of the ongoing trade war initiated by President Trump. Business leaders are particularly worried about rising costs associated with employment and tax, which they feel could hinder growth and investment decisions. Inheritance tax revenue also reached a record £6.7 billion, contributing to the call for further tax increases, although Chancellor Rachel Reeves is skeptical of implementing a wealth tax.

Key Takeaways

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Business confidence is at a record low since Brexit, indicating economic uncertainty.

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A survey showed many leaders anticipate rising costs and further tax increases.

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The government faces pressure to address declining growth and potential investor flight.

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Inheritance tax reached a record, raising concerns among wealthy families.

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Chancellor Rachel Reeves is considering new tax policies amid intense scrutiny.

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Companies express frustration over the increased cost burden without improvements to the business climate.

"Companies continue to battle cost increases and many are frustrated that while the government has been quick to raise costs for business, it has been much slower to deliver improvements to the wider business environment."

Anna Leach, chief economist of the Institute of Directors, highlights the frustration of businesses facing cost increases without support from the government.

"The danger with seeking further taxation of wealth is that wealthy households could get fed up and leave the country."

Ian Dyall from Evelyn Partners cautions against further taxing the wealthiest without considering the consequences for public finances.

The steep decline in economic confidence highlights a critical moment for the UK government. Companies are increasingly burdened by rising costs and uncertainties surrounding tax policy, which could significantly affect their investment strategies. History suggests that when companies are hesitant to invest, broader economic growth suffers, potentially leading to a cycle of stagnation. The looming specter of increased taxation may further push wealthy individuals to rethink their residency in the UK, which could have serious implications for public finances. As the government faces backlash over its fiscal policies, finding a balance between necessary revenue collection and fostering a positive business climate will be essential.

Highlights

We are witnessing historic lows in business confidence that should alarm every policymaker.
Tax burdens are driving more companies to hesitate in their investments.
The UK's wealthy are contemplating their future here, and that is a dangerous sign.
Record inheritance tax collections reflect a troubling trend for many families.

Rising tax concerns may threaten economic stability

The significant drop in economic confidence and potential tax increases could lead to a backlash from businesses and wealthy individuals, risking their departure from the UK.

The government must navigate these challenges carefully to restore confidence among businesses and investors.

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uk economy tax policy chancellor reeves business confidence inheritance tax economy politics finance

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