Business bosses in state of despondency over toxic mix of Labours tax hikes and Trumps tariffs, survey warns

Businesses are in a state of despondency as Labours eye-watering tax hikes and US tariff measures unleashed by Donald Trump batter the economy, a survey warns.

Confidence among firms fell to its lowest level in two years in the first three months of the year, according to the study from the Institute of Chartered Accountants in England and Wales (ICAEW).

The industry body found the confidence index had hit a negative level of -3 which coincided with particularly difficult periods for the UK economy including the 2022 inflation shock following Russias invasion of Ukraine.

Rachel Reeves has sought to blame US tariffs for the source of economic woes.

On Sunday the Government suspended tariffs on 89 imported products, with the Chancellor claiming it was supporting British business and putting more money in peoples pockets.

But Ms Reeves measures were found to be the main cause of issues facing firms in the ICAEW survey, with the body saying firms had been left with record high worries over tax after the hike in employers National Insurance contributions which came into force this month.

It added that more than half of the businesses polled (56 per cent) said the growing tax burden was a challenge, which is a record and three times the historical average. Firms were also predicting that UK sales would decline across the rest of the year despite a rise in the first three months of 2025.

Suren Thiru, of the ICAEW, said: These figures suggest that this year has so far been a pretty harrowing one for the UK economy.

Rachel Reeves (pictured in April) has sought to blame US tariffs for the source of economic woes

Businesses are in a state of despondency as Labour s eye-watering tax hikes and US tariff measures unleashed by Donald Trump batter the economy, a survey warns. Trump is pictured last month 

Tory business spokesman Andrew Griffith (pictured in April) said the report confirms businesses are giving a huge thumbs down to the way Labour is running the economy

The mood music on the economy is turning increasingly sour and with forward-looking indicators of sales and employment activity weakening, things may get worse before they get better.

The body noted that while British firms had so far limited price rises for customers due to growing bills, this had been offset by more restrained recruitment and weaker spending on staff training.

Tory business spokesman Andrew Griffith said the report confirms businesses are giving a huge thumbs down to the way Labour is running the economy.

He added: It may yet get worse: these results were before the jobs tax and Angela Rayners 300-page Workers Rights Bill. Keir Starmer needs to get a grip before Britain falls further behind.

The ICAEW found that the pausing of US tariffs for 90 days by President Donald Trump had provided some relief but said firms are still facing huge uncertainty.

Chief executive Alan Vallance called on the Government to step up and said the Prime Minister and the Chancellor must do their best to defuse global trade tensions.