UK business confidence has recorded its longest sustained decline since the 2008 global financial crisis, according to a survey of 1,000 business leaders by the Institute of Chartered Accountants in England and Wales (ICAEW).
Confidence was expected to return to positive territory in the third quarter (Q3) for the first time since Q4 2024, as stronger-than-expected conditions lifted domestic sales and drove profit growth to a two-year high.
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However, the ICAEW’s Business Confidence Monitor fell from +7.3 in late August to -0.5 at the end of its ten-week September survey, following renewed US-Iran tensions that raised oil and gas prices and weakened sentiment.
Although improved from -14.6 in Q2, confidence has remained negative for seven consecutive quarters, matching the longest period on record since the 2008 financial crisis.
Geopolitical risk was the main constraint, cited by 58% of companies, followed by labour costs (53%), regulation (47%), energy costs (45%) and taxation (41%).
Businesses remained cautious about the year ahead, with growth expectations for domestic sales, profits and turnover all weakening in Q3, the report found.
Meanwhile, research and development increased at its fastest pace in four years as companies invested in productivity and efficiency, likely supported by wider AI and technology use.
Separate ICAEW research found that 63% of businesses facing higher costs had adopted productivity measures, compared with 54% raising prices and 25% postponing expansion.
ICAEW CEO Alan Vallance said: “The warning bells will be ringing for the Prime Minister and Chancellor ahead of the Budget, with sentiment stuck in a rut as the resilience of Britain’s businesses continues to be tested by geopolitical events.
“While there is much the government can’t control, the Budget presents an important opportunity to turn ambition into action. Businesses have been burdened by rising costs, higher taxes, regulatory change and persistent uncertainty for far too long.
“Business rates reform is key to unlocking growth. A one-year freeze in the multiplier would provide immediate relief, while a commitment to longer-term reform would boost confidence and investment.”
The next UK Autumn Budget is scheduled for 28 October 2026.
