UK business confidence falls to lowest level in almost two years after Labour budget

LONDON — British businesses lost steam and pulled back on hiring last month, as industry reacted to the Labour government's bumper tax-raising budget, new data showed Monday.

Business confidence in the U.K. fell in November to its lowest level since January 2023, fresh data from business advisory and accountancy firm BDO showed.

BDO's Optimism Index fell 5.81 points on the month to 93.49, marking the biggest month-on-month decline since August 2021.

The fall — which was recorded across both the services and manufacturing sectors — is "likely to reflect businesses' immediate reaction to announcements in the Autumn Budget," BDO said.

U.K. Finance Minister Rachel Reeves on Oct. 30 delivered her much anticipated Autumn budget, which included a slew of tax hikes. Chief among them was an increase to the National Insurance (NI) payroll tax paid by employers and an uptick in the National Living Wage.

Businesses reacted with consternation at the time, warning that the measures — intended to boost growth — would instead push up inflation and slow hiring.

BDO, in its report, pointed to rising costs, falling orders and continued labor market challenges as key issues currently facing businesses.

"Despite businesses pinning their hopes on the prospect of further interest rate cuts early next year, cost pressures — including higher National Insurance Contributions — may offset any positive effects, leaving a mixed future picture for businesses," it added.

It comes as U.K. job vacancies fell in November at the fastest rate since the start of the pandemic, according to fresh monthly job market data from accountancy firm KPMG and the Recruitment and Employment Confederation (REC).

The report, also released Monday, showed demand for staff fell at a