Business confidence in the UK fell to its lowest level on record in September, driven by soaring costs, according to a survey of company bosses. Labour costs topped the list of concerns, with energy prices also weighing heavily on the outlook.
Anna Leach, chief economist at the Institute of Directors, said: “Business confidence has plumbed new depths in September, following a fleeting improvement at the tag-end of summer. Conditions worsened across the board, with cost expectations hitting a record high, driven notably by employment costs.”
The gloomy data came as two Bank of England policymakers warned that UK inflation may not fall as fast as expected next year. Deputy governor Clare Lombardelli said central bankers should be careful about assuming inflation shocks are temporary, while MPC member Catherine Mann stated she believed an inflation persistence scenario was playing out.
Both Lombardelli and Mann voted against the Bank’s most recent interest rate cut in August. However, MPC member Sarah Breeden struck a more dovish tone, saying the current inflation “hump” was likely temporary and unlikely to persist into 2026.
Chancellor Rachel Reeves had earlier told the Labour conference that the government’s economic stability justified five interest rate cuts over the past year. But sticky inflation could limit further cuts, denting her budget plans.
