UK business confidence plunges to lowest level on record

Business confidence slumped to its lowest level on record last month amid concerns over soaring costs, according to a new survey of company bosses.

Data from the Institute of Directors (IoD) showed that firms said higher labour costs has been the biggest contributor to growing pessimism about the economy.

The industry group’s monthly economic confidence index, which measures business leader optimism about the prospects of the UK economy, posted a minus 74 reading for September.

It marked a significant decline from minus 61 and struck the lowest level since the index was launched more than nine years ago.

The previous record low was a reading of minus 72 recorded in July this year in the face of worries over trade tensions.

In the fresh research, business bosses also saw cost expectations increase to reading of plus 89 amid an uptick in inflation.

Around 83% of surveyed leaders linked the worsening outlook to higher labour costs, while supply chain inflation and energy costs were also highlighted as significant factors.

Labour costs jumped for many firms from April after the Government increased the national minimum wage and National Insurance Contributions (NICs) for businesses.

Anna Leach, chief economist at the IoD, 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. Investment expectations declined again, although remained somewhat above the most recent low in November 2024.

“Meanwhile headcount expectations continue to seesaw as the effects of the April rises in employment taxes and the living wage, alongside future concerns over employment regulations, continue to reverberate across companies.”

Shadow chancellor Sir Mel Stride said: “Business confidence has been shattered, not by global uncertainty, but by deliberate choices made by the Labour government.”