At Amanah Accountants, we always keep a close eye on the economic landscape – not just for our own operations, but for the many businesses we support day in, day out. And right now, the warning signs are flashing red.
According to the latest ICAEW Business Confidence Monitor (Q1 2025), business confidence across the UK has fallen into negative territory for the first time since 2022. It’s a clear signal that many of the companies we work with – particularly SMEs and owner-managed businesses – are grappling with serious challenges.
With confidence now sitting at -3 on the index (down from 0.2 last quarter), there’s growing concern about how rising taxes and new US tariffs are creating an unpredictable and costly environment for British businesses. It’s not just about numbers on a chart – it’s about the very real decisions our clients are having to make daily: whether to hire, invest, or even keep the lights on.
Tax Worries Hit Record High
From our conversations with clients across sectors, one thing is clear – tax concerns are weighing heavier than ever. The ICAEW report confirms this, with 56% of businesses citing tax as a growing challenge – a record high. That’s more than double the previous peak and a sevenfold rise in just four years.
As accountants, we see firsthand how changes to National Insurance, corporation tax, and compliance burdens are squeezing margins and forcing difficult choices. For our clients, it’s not just about paying more – it’s about having less time and energy to focus on growth and innovation.
Sector Pain: Manufacturing, Property & Retail Feel the Strain
The pain isn’t spread evenly. The survey highlights steep drops in business sentiment across manufacturing (-11.1), property (-10.3), and retail & wholesale (-8.4) – sectors where many of our clients operate. These industries are particularly sensitive to supply chain issues, import/export costs, and now, the impact of new tariffs.
On the brighter side, areas like IT and communications, construction, and energy saw modest confidence gains – but even they are not immune to wider economic pressures.
Labour Market Wobbling
Employment growth has slowed across the board, with Q1 seeing just 1.2% growth, the weakest since mid-2021. Alarmingly, the IT sector – traditionally a strong performer – saw a 0.6% contraction, its worst since 2010.
For many of our clients, recruitment and staff development are on hold. Investment in training has dipped to its lowest level since 2021. And it’s not just about costs – there’s real uncertainty about future sales and the ability to maintain or grow headcount.
Inflation Creeping Back
After a brief respite, input costs are rising again, marking the first increase in nearly two years. Though businesses expect selling price inflation to ease, rising expenses in raw materials, energy, and logistics are already cutting into profits – especially for smaller firms with less buffer.
What This Means for Amanah Clients
For our clients – many of whom are small businesses or entrepreneurs – this isn’t just economic theory. It’s lived reality. Cashflow planning is harder. Tax liabilities are growing. Confidence in future sales is slipping.
At Amanah Accountants, we’re committed to helping clients weather this storm. That means not only staying compliant and efficient with their tax planning but also being proactive in identifying opportunities for cost savings, grant access, restructuring, and long-term resilience.
Disclaimer: This content is for general information only and should not be taken as legal or financial advice. Always seek professional support tailored to your specific situation.