Business confidence among UK firms drops to lowest level since 'mini-budget', survey reveals

• The British Chambers of Commerce survey revealed that U.K. firms' confidence has fallen to its lowest level since the "mini-budget" crisis in fall 2022.
• The largest poll conducted by the trade group revealed a significant decline in sentiment since the Labour government's debut budget in October, which included an increase in the amount many employers pay out in National Insurance (NI), a tax on earnings.
• Firms in the hospitality, manufacturing, construction, and health-care sectors are expressing concerns about covering additional costs and may reduce their investment as a result.

Since the market-rocking "mini-budget" crisis of fall 2022, UK firms are planning to raise prices to cover higher tax payouts as confidence among businesses tumbled to its lowest level.

The largest poll conducted by the trade group revealed a significant decline in sentiment since the Labour government's debut budget in October, which included an increase in the amount many employers pay out in National Insurance (NI), a tax on earnings.

In the survey, 63% of businesses cited tax as a concern, an increase from 48% in the third quarter. Over half (55%) of businesses anticipate price increases in the next three months, mainly due to higher labor costs.

The percentage of companies anticipating an increase in turnover over the next year decreased from 56% to 49%, while worries about inflation and interest rates remained relatively stable.

Firms in the hospitality, manufacturing, construction, and healthcare sectors are expressing concerns about covering additional costs and may reduce their investment as a result, according to the BCC.

The Labour Party, which came to power in July, contends that tax increases were necessary to address a significant budget deficit resulting from the previous government. Additionally, the party has previously stated that over half of U.K. businesses will see no change or a reduction in their national insurance payments due to exemptions.

The BCC survey mirrors earlier research indicating a decrease in confidence among UK businesses following the budget, as well as previous criticism from top business leaders that the budget has caused uncertainty and may hinder economic growth, which is a central objective of Finance Minister Rachel Reeves.

No growth was recorded in the third quarter for the U.K., which is already experiencing stagnation.

We acknowledge that [Reeves] stated the need to raise taxes to address her budget deficit, but what we require now is for her to take measures to reduce the impact of this increase on the economy. How can we work together to stimulate economic growth? Shevaun Haviland, the head of the BCC, discussed this topic with CNBC's "Squawk Box Europe" on Monday.

"To address the tax increase, businesses must act quickly and implement strategies such as industrial, trade, and infrastructure plans."

Following the October 2024 budget, U.K. borrowing costs have surpassed the levels they reached after the September 2022 "mini-budget," when then-Prime Minister Liz Truss unveiled sweeping, unpriced tax cuts.

According to economists, the recent increase in bond yields is not comparable to the surge experienced in 2022 because the moves have been less dramatic and the macroeconomic environment, including a decrease in inflation, has shifted.