Fears over energy tax rises as business confidence falls

In the run-up to the general election, Labour positioned itself as the party of “wealth creation”, with the aim of improving living standards for working people.

Central to that was its claim that it would encourage businesses to invest more, something that has been languishing since 2016. The party hoped this would lead to more funding for training, skills, technology and buildings which, economists say, would make the UK more productive.

However, last week, Prime Minister Sir Keir Starmer warned the autumn Budget in October, where the government will outline its taxation and spending plans, would be “painful”.

Talk of tax rises and increased employment rights has “dented confidence in the environment for business in the UK”, said Anna Leach, chief economist at the Institute of Directors (IoD) business group.

The IoD’s Directors’ Economic Confidence Index, which measures business leader optimism, hit a three-year high in July, but fell back sharply in August, according to the latest survey.

“It’s disappointing to see [July’s] welcome uptick in business leader confidence snuffed out over the summer,” said Ms Leach.

The group said investment intentions for the year ahead saw the sharpest decline since the beginning of the Covid pandemic lockdowns.

Revenue and headcount expectations for business bosses also fell last month.

“We are calling on the government to take time to get policy design right for the long-term, and deliver the stable tax and policy framework needed to drive business confidence and investment,” Ms Leach added.