• Swindon & Wiltshire Economy
• Thursday January 9 2025
• Author Name: Peter Davison

Business confidence slips following Autumn Budget

Business confidence has slipped to its lowest point since the disastrous mini-Budget of Liz Truss, according to a major economic report out this week.

While “worst Budget in two years” doesn’t, on the face of it, sound like a damning indictment it’s not the strong start on the economy that the Labour government had been hoping for either.

Tellingly, the biggest concern for business owners in the Q4 Quarterly Economic Survey from the British Chambers of Commerce was tax.

At 63 per cent nationally, taxation – including National Insurance contributions – has not been such a major concern for businesses since 2017. Back in Q3 only 48 per cent of businesses cited it as a worry.

Business confidence has declined significantly with 49 per cent of responding companies expecting their turnover to increase over the next twelve months (compared with 56 per cent in Q3).

Confidence levels are lowest in the retail and hospitality sectors – 39 per cent and 42 per cent respectively.

The survey was conducted by regional chambers of commerce after the Budget, with the fieldwork carried out between November 11 and December 9.

The data from over 4,800 businesses across the UK – 91 per cent of whom are SMEs – also shows that the majority of firms are expecting to raise prices.

The picture in Bristol, Bath, Somerset, Wiltshire and Gloucestershire

Bristol

In the South West – excluding Swindon – surveys were carried out by Business West.

Their pollsters found 62 per cent of businesses identifying tax as a pressing issue – up from 33 per cent last quarter.

“This marks a substantial increase compared to previous quarters and underscores the growing frustration among businesses regarding the current tax system,” said Business West.

“Many respondents expressed concerns about how taxation policies are impeding their ability to compete, grow, and invest in the future.”

One of the most striking findings in Q4 was the downturn in UK sales. The net balance for domestic sales dropped sharply, falling from -1 per cent in Q3 to -11 per cent in Q4.

While 21 per cent of businesses reported increased sales, a larger proportion (32 per cent) experienced declines.

Export performance also weakened during the quarter, with the net balance for export sales slipping further into negative territory (-7 per cent in Q4 compared to -5 per cent in Q3). Only 11 per cent of businesses saw growth in export sales, while 18 per cent reported declines.

Cash flow remains a critical concern for businesses in the South West. Just 17 per cent of respondents reported improvements in their cash positions, while 39 per cent faced worsening conditions.

Recruitment activity held steady in Q4, with 45 per cent of businesses actively seeking new staff. However, finding the right talent remains a persistent issue, with 64 per cent of respondents reporting difficulties in recruiting skilled candidates.

Managerial and specialist roles are proving particularly hard to fill, a trend that threatens to stifle business growth and innovation.

Emma Carter, membership director at Business West, said: “Our members are telling us that the recruitment landscape remains one of their biggest challenges right now. The difficulty in finding skilled candidates not only affects day-to-day operations but also impacts long-term strategic planning.”

While 70 per cent of businesses maintained stable prices over the past three months, 27 per cent raised their prices, and only three per cent reduced them.

This pricing behaviour, said Business West, reflects the balancing act businesses face in managing rising input costs while remaining competitive. On profitability, the outlook is mixed: 31 per cent of businesses forecast improvement, 25 per cent expect stability, and 43 per cent anticipate a decline.

Confidence in the UK economy deteriorated significantly this quarter, with a net balance of -53 per cent, compared to -12 per cent in Q3. Only eight per cent of businesses expressed positivity, while 61 per cent felt negative about the economic outlook.

Gus Guntren, policy analyst at Business West, said: “One of the recurring themes in this quarter’s survey is the increasing concern over taxation.

“Over 62 per cent of respondents highlighted tax as a significant issue, a large increase from 33 per cent in our Q3 survey. Having endured the challenges of the energy crisis and the recent inflationary period, many respondents now fear that the announced tax changes will further complicate their operations.”

The picture in the Thames Valley

Swindon

In the South West – including Swindon – surveys were carried out by Thames Valley Chamber of Commerce.

Their pollsters found 61 per cent of businesses identifying tax as a pressing issue – up from 42 per cent last quarter.

Again, business owners reported a decline in UK sales – 48 per cent said UK sales had increased, and only 39 per cent said UK orders had increased over the quarter.

On the jobs front, 35 per cent of respondents said their workforce had increased over the quarter with 15 per cent saying their workforce had shrunk. Looking ahead, 37 per cent said they expected headcounts to increase, with only seven per cent expecting to make redundancies.

Cashflow remained a concern for Thames Valley businesses. 35 per cent said cashflow had increased, but 15 per cent said it had decreased.

Paul Britton, CEO of Thames Valley Chamber of Commerce, said: “It is clear that the Autumn Budget is taking a toll on business confidence.

“The response to this survey which followed in the weeks after the budget reflects that local businesses feel they are carrying the weight heavily of the Government’s plans for renewal, with tax by far the top external concern.

“Business confidence and appetite for investment has been impacted due to the expectation of these rising taxes.

“It is not clear yet to what extent our business communities’ track record of resilience will shine through the gloomy national picture, and to what extent the dynamic nature of our key sectors will support a return to greater confidence through 2025 and beyond, but it is important to celebrate examples of our flourishing companies and reasons to be optimistic.”

The QES is a leading indicator, often picks up changes in the economy long before other surveys and official statistics and consistently mirrors trends in official data.

It remains closely watched by both UK Government and the Bank of England.