90% of firms expect negative impact from tax rises, Armstrong Watson finds

Almost two-thirds of businesses are pessimistic about the overall economic outlook for 2025 and nearly 90% expect the changes announced in the 2024 Autumn Budget to impact their business adversely, according to Armstrong Watson’s latest survey.

Despite positive news this week that the economy grew in the final quarter of 2024 – with official figures showing GDP increased by 0.1%, Armstrong Watson said its January 2025 Client Business Confidence Survey indicates that confidence has been “hit hard” across the business community.

Armstrong Watson’s survey comes shortly after the Institute of Chartered Accountants in England and Wales (ICAEW) released the findings of its latest quarterly business confidence monitor, which reflects a similar picture nationally. It found that business sentiment plummeted to the lowest level for two years in the final quarter of 2024, only just remaining positive as it fell from +14.4 to +0.2.

The accountancy, business and financial advisory firm, which has offices based across the North of England and Scotland, also found that only 11% believe trading conditions will be better in 2025 than they were last year.

Nearly 70% of business owners anticipate conditions to worsen, denting confidence in their outlook for the future. However, it said there “remains a glimmer of optimism” amongst some clients, with just under a quarter of respondents stating they are somewhat optimistic (19%) or very optimistic (3%) about the year ahead in business.

With Employer’s National Insurance Contributions increasing in April, 65% of businesses said they would decrease hiring, either slightly or significantly, as a result. More than half (56%) of businesses intended to maintain their current workforce levels, while worryingly, 36% said they planned to reduce staff numbers.

Paul Dickson, Armstrong Watson’s chief executive and managing partner, said: “Though there is a tiny glint of hope that the economy has returned to growth, there is still not a lot to cheer about. To a large extent, this pessimistic outlook has been driven by the impact that the Autumn Budget will have on businesses from April 2025.

“The increase in Employers’ National Insurance is weighing heavily on business owners, not to mention the proposed changes to Agricultural Property Relief and Business Property Relief, which will significantly impact family farms.”

He added: “As a result, businesses are less likely to make capital investments as a direct impact of increased outgoings and a lack of confidence in the future. This is reflected in how business owners feel the increased costs of employing people will impact their recruitment decisions.

“While on the one hand, it’s positive that the majority of businesses will maintain their current workforce, it is worrying to know, that more than a third do not expect to be able to maintain their current workforce and that the majority will also hire fewer people.The results of this survey do not bode well for the chancellor’s growth strategy, as businesses do not feel confident about the future, impacting their decisions to hire or not, or to invest or not.”