Business confidence in UK economy falls ahead of Reeves’s maiden Budget

Business confidence has slumped again in the run-up to Rachel Reeves’ maiden Budget as bosses fret over the state of the economy, another survey has shown.

The closely-watched Lloyds’ Business Barometer fell by three points to 44 in October, down three points on the month before and dragging the reading to a four-month low.

The decline reflected falls in both firms’ confidence in the economy as a whole as well as their own trading prospects.

Confidence in the economic outlook fell to its lowest level since March while firms’ optimism in their own prospects eased from September’s year-high, the survey showed.

Lloyds’ survey is only the latest to point to worsening economic sentiment ahead of the new government’s first Budget. Last week’s S&P’s purchasing managers’ index put business confidence at its lowest level this year while consumer confidence has worsened significantly.

Many economists have criticised the government’s gloomy rhetoric, with Chancellor Rachel Reeves repeatedly warning that she will have to take “difficult decisions” in the Budget.

Reports suggest she is looking to raise £40bn through a combination of tax rises and spending cuts to ensure that public services receive a funding boost.

The increase in the tax burden is likely to fall most heavily on businesses, with Reeves set to hike employers’ national insurance and raise capital gains tax.

Despite the decrease in confidence, the survey showed that hiring intentions had actually improved marginally compared to September.

Hann-Ju Ho, senior economist at Lloyds Commercial Banking, suggested that firms were actually in a fairly healthy position entering the final quarter of the year.

“Business sentiment remains above historical levels,” he said. “The increase in hiring intentions suggests more employers want to grow their workforce.    

“Businesses’ broader economic outlook continues to reflect this rounded picture, and as they move into the final part of the year, they will look to manage these considerations effectively,” he added.