Business confidence falls 

Business confidence in the UK has fallen, according to the British Chambers of Commerce (BCC), with only 46% (compared with 48% in Q3) of companies expecting increased sales this year and 24% saying they expect to see a decline in turnover. The survey saw 63% of firms polled cite tax rises as their primary concern, while 72% reported rising labour costs as a significant pressure. This is the lowest level in three years. 

Meanwhile, 30% expect no change, and 24% expect a decrease in turnover.   Retail and hospitality continue to be the sectors suffering the most. Only a third (33%) of hospitality firms expect increased turnover in the next 12 months, with 38% expecting a decrease. 36% of retailers expect increased turnover, while a third (33%) forecast a decrease. 42% of manufacturers and 43% of firms in the construction industry are expecting increased turnover.  

The percentage of responding businesses reporting increased domestic sales has fallen to 29% (from 32% in Q3). 42% reported no change, and over a quarter (28%) said they had seen a decrease in sales (up from 25% in Q3). Sectoral breakdowns show that increased sales were at their lowest among hospitality (22%) and manufacturers (23%). 

The percentage of firms reporting a fall in cash flow over the last three months has risen to 32%, compared with 29% in Q3. 23% report an increase in cash flow, while 45% say it remained the same.  

Tax remains the biggest concern for business, cited by 63% of firms, up from 59% in Q3. This is the same level of concern seen in Q4 2024, after the previous Budget. 

However, concern about taxation was heightened prior to the Budget on 26 November. Before the Chancellor’s statement, 68% of businesses that had taken part in the survey said tax was a concern. After the Budget, tax concern fell to 61% of responding firms. Worries about inflation remain high, cited by 56% of firms, broadly similar to Q3.  

With businesses facing a raft of persistent cost pressures, investment levels in plant, machinery and equipment are stuck in negative territory for the fifth quarter in a row. Over a quarter (27%) of businesses say they have cut back on investment plans, while 53% say they have remained unchanged, and just 19% of firms increased their plans.  

The issue is more marked in certain sectors. Over a third of hospitality firms (37%) and retail businesses (36%) report scaling back investment plans. While 32% of manufacturers say they have cut back their investment plans.   

Over half of firms (52%) are expecting to raise their prices in the next three months, up significantly from the previous quarter (44% in Q3). 45% say their prices are likely to remain the same in the early part of 2026, and only 3% are expecting to cut prices.  

Labour costs continue to be far and away the main cost pressure for firms, cited by 72% of respondents, unchanged from Q3. The issue remains the most significant in the hospitality sector (82%) and manufacturing (80%).  

David Bharier, Head of Research at the British Chambers of Commerce, said “Our data shows more clouds have gathered over business confidence, and the outlook for SMEs in 2026 is unsettled.  

“Firms tell us they are worried about tax, struggling to invest and fear they’ll have to put their prices up in the months ahead. Firms’ confidence in their turnover growth has been stuck stubbornly below 50% for the last 12 months.  

“After a long period of uncertainty and speculation heading into the Budget, concerns about major new tax rises eased somewhat in the aftermath. However, a Budget fundamentally light on growth measures did little to boost business confidence, and sentiment overall has worsened since the previous quarter. 

“It is now critical that 2026 is a year of delivery. The Government needs to turn last year’s strategies into action; boost investment, significantly expand trade, and ease the myriad burdens facing businesses. Only then will the economic outlook shift from its current low-growth trajectory.”