Business confidence in the UK has plummeted to its weakest level in nearly five years following the recent Budget, with companies slamming the brakes on hiring and setting the stage for another grim year of economic stagnation, leading experts warned.
Pessimism Hits Pandemic-Era Lows
The accountancy group BDO reported that its 'optimism index' for businesses fell last month to its lowest point since January 2021. This means firms are now the most pessimistic they have been since the height of the pandemic. The decline in morale was described as 'broad-based across both manufacturing and services', indicating a widespread lack of faith in the economic outlook.
Scott Knight, head of growth at BDO, stated: 'Business confidence is at its weakest in years. It is far from ideal. Business costs are rising and turnover expectations are falling. It's no wonder that optimism is on the floor.' He emphasised that decisive action, such as further interest rate cuts and a clear government roadmap, is critical for businesses to consider growing and investing again.
Recruitment Grinds to a Halt
A separate survey by KPMG and the Recruitment & Employment Confederation (REC) provided stark evidence of the slowdown, showing that hiring 'slowed to a crawl' at the end of 2025. The report found that permanent staff appointments fell at the quickest rate in four months during December, as companies reeled from the November Budget.
Neil Carberry, chief executive of the REC, said: 'Making this a better year for hiring will require a focus on building business confidence to invest.' However, he suggested this would be an 'uphill struggle' following a second tax-raising Budget, another significant increase to the minimum wage, and the government's updated workers' rights legislation.
Jon Holt, chief executive of KPMG UK, noted: 'The jobs market at the end of 2025 was still signalling caution... many firms continue to pause hiring.' He added that business leaders are prioritising investment in technology over new staff until they see signs of greater economic confidence.
Political Pressure Mounts on Chancellor
The damning data piles significant pressure on Chancellor Rachel Reeves, with critics blaming government policy for the collapse in business sentiment. Tory business spokesman Andrew Griffith said: 'These surveys show that business confidence is collapsing about as fast as the Prime Minister's popularity.'
Griffith argued that businesses are being held back from hiring and investing by a combination of low consumer demand, higher employment costs, and the impact of what he termed Labour's 'red tape Unemployment Bill'. The BDO report concluded that the close link between business confidence and economic activity means that persistently low optimism is likely to keep national output constrained, with high operating costs continuing to weigh down growth.
