The findings, from the Armstrong Watson January 2025 Client Business Confidence Survey, show that almost 90% of respondents believe the changes introduced in the 2024 Autumn Budget will have a negative impact on their operations.
While there was a slight glimmer of hope this week, with official figures indicating a 0.1% GDP growth in the last quarter of 2024, the overall mood among businesses remains bleak. The survey points to a significant decline in confidence, with many businesses worried about the long-term implications of the current economic environment.
This follows the release of the Institute of Chartered Accountants in England and Wales (ICAEW) quarterly business confidence monitor, which paints a similar picture of national sentiment. According to ICAEW, business confidence reached its lowest level in two years by the end of 2024, dipping from a positive +14.4 to just +0.2, signalling a dramatic slowdown in optimism.
These developments indicate widespread concern in the business community as companies brace for the ongoing challenges posed by economic conditions and government policy changes.
The accountancy, business and financial advisory firm, which has offices based across the North of England and Scotland, also found that only 11% believe trading conditions will be better in 2025 than they were last year. Nearly 70% of business owners anticipate conditions to worsen, denting confidence in their outlook for the future. There remains a glimmer of optimism amongst some clients however, with just under a quarter of respondents stating they are somewhat optimistic (19%) or very optimistic (3%) about the year ahead in business.
With Employer’s National Insurance Contributions increasing in April, 65% of businesses said they would decrease hiring, either slightly or significantly, as a result. More than half (56%) of businesses intended to maintain their current workforce levels, while worryingly, 36% said they planned to reduce staff numbers.
Paul Dickson, Armstrong Watson’s Chief Executive and Managing Partner, said: “Though there is a tiny glint of hope that the economy has returned to growth, there is still not a lot to cheer about. To a large extent, this pessimistic outlook has been driven by the impact that the Autumn Budget will have on businesses from April 2025. The increase in Employers’ National Insurance is weighing heavily on business owners, not to mention the proposed changes to Agricultural Property Relief and Business Property Relief, which will significantly impact family farms.
“As a result, businesses are less likely to make capital investments as a direct impact of increased outgoings and a lack of confidence in the future. This is reflected in how business owners feel the increased costs of employing people will impact their recruitment decisions. While on the one hand, it’s positive that the majority of businesses will maintain their current workforce, it is worrying to know, that more than a third do not expect to be able to maintain their current workforce and that the majority will also hire fewer people.
“The results of this survey do not bode well for the Chancellor’s growth strategy, as businesses do not feel confident about the future, impacting their decisions to hire or not, or to invest or not.”
Key challenges identified by Armstrong Watson’s survey include customer demand, regulatory changes, and competition. Businesses have highlighted the need for support in areas such as tax planning, financial advice, and market analysis to navigate these changes.
Paul added: “While some of the challenges are outside of a business’s control – and it is important that they forecast the impact this will have – there are other areas business owners can influence and control, and which they can focus on and plan carefully around, to mitigate the widespread impact of the impending tax rises they face.
“We understand these are uncertain times and we are here to support business owners as best we can through the challenges that lie ahead.”
