What Nervous Businesses Might Expect from the Upcoming Budget

Business leaders across the UK are approaching the chancellor’s second Budget with a sense of unease. Many firms are still dealing with the impact of last year’s sharp tax increases, including the twenty five billion pound rise in National Insurance and a substantial uplift in the minimum wage. These measures have left financial pressures that continue to shape decision making in boardrooms.

Over the past six months, surveys of chief executives and finance directors have consistently shown falling confidence. With economic growth already sluggish, there is widespread concern about how new tax policies might affect investment plans, hiring and long term stability. As a result, business owners are anxious to understand what direction Rachel Reeves may take.

Higher taxes are expected, and economists say this will remove spending power from the economy. Capital Economics estimates that the Budget could reduce GDP by around zero point two per cent in 2026, a significant impact for an economy that grew only zero point one per cent in the most recent quarter. However, any tightening by the Treasury may be offset by the Bank of England, which is widely expected to lower interest rates next year. Cheaper borrowing could encourage businesses and consumers to spend more, helping soften the blow of tax rises.

Government advisers suggest the chancellor will focus on positive signals such as easing inflation and a more stable economic outlook. One priority is expected to be avoiding unexpected changes, with ministers keen to show that there will be no sudden tax shocks for businesses. Many companies say predictability has become as important as direct financial support.

The CBI’s director general, Rain Newton Smith, has urged the government to ensure stability and avoid loading more taxes onto firms. Speaking at the organisation’s annual conference, she called for “hard choices for growth” and said that one or two broader tax rises would be preferable to what she described as “death by a thousand taxes.”

Business rates remain a major concern. Many companies have seen their bills surge after a pandemic era discount for retail, hospitality and leisure businesses was reduced. The chancellor has previously pledged to reform the system, and there is speculation she may make existing discounts permanent or smooth out sharp increases faced by growing small businesses. Funding for such measures could come from higher rates on large retail properties.

There is also uncertainty around the banking sector. While increased taxes on bank profits have been discussed, ministers worry that such a move might undermine the government’s pro growth message. One option under review is reducing Treasury payments to the Bank of England that cover losses from past bond buying programmes. This would lower payments to commercial banks and could be interpreted as a tax rise in practice.

Oil and gas companies are pushing for relief from the additional thirty eight per cent levy on top of their existing industry rate. They argue that with lower oil prices, there are no windfall profits to tax and that investment in the North Sea is already declining. Ministers may consider phasing out the tax earlier than its current 2030 expiry date.

With pressures mounting and confidence fragile, businesses will be watching closely for signs of stability and clear long term planning.