Bosses’ confidence hits ‘rock bottom’ as Budget looms

Confidence in the economy has hit “rock bottom” as businesses brace for tax rises in the upcoming Budget, a new survey shows.

The Institute of Directors (IoD) said its closely watched poll of business leaders’ optimism in the economy remained at historic lows amid gloom over possible new tax-raising measures from Rachel Reeves.

The IoD survey stood at minus 73 in October, up marginally from minus 74 in September – the lowest reading since the index began nine years ago.

Anna Leach, the chief economist at the IoD, said: “Business confidence remained at rock bottom in October, as businesses expect the worst from the autumn Budget.”

Ms Leach added that many companies had put their investment and recruitment decisions “on hold” ahead of the Budget.

She said that “policy uncertainty ahead of the Budget and a rumour mill is really leading to a lot of wait-and-see behaviour” for businesses.

The growing uncertainty comes as company bosses remain wary following her record tax-raising Budget last year.

Ms Reeves increased taxes by £40bn in last year’s autumn Budget, including a £25bn raid on employers’ National Insurance contributions.

Companies froze recruitment, cut staff and increased prices to cope with the rise in labour costs.

The IoD survey showed that business leaders’ hiring expectations remained negative at minus two in October, but up from minus 13 a month earlier.

Sir Mel Stride, the shadow chancellor, said: “Businesses are stalling on hiring and investment because they simply don’t trust Labour to keep their word.

“Rachel Reeves promised the most pro-business Treasury ever. Instead, she’s hit employers with a £25bn jobs tax – and now even more taxes are coming because she hasn’t got a plan or the backbone to control spending.

“Month after month, it’s the same story: uncertainty and speculation.”

Worries among business leaders about significant tax increases come as Ms Reeves grapples with rising government spending and speculation mounts about potential revenue-raising measures.

The Treasury is understood to be exploring a 2p rise in income tax, a move that would break Labour’s manifesto pledge.

This week, Sir Keir Starmer refused to stand by the manifesto pledge not to raise VAT, income tax or National Insurance this parliament.

The Chancellor said her maiden Budget was a “once-in-a-parliament Budget to wipe the slate clean” and last year promised she was “not coming back” for more.

However, Ms Reeves has been forced to consider another record-equalling Budget tax raid after Labour struggled to push through benefit cuts.