“With cost control to the fore in the wake of the Budget, CFOs have trimmed expectations for corporate investment, discretionary spending and hiring in the next 12 months.”
Rachel Reeves’ disastrous budget has dealt yet another blow to UK businesses, with new figures revealing a dramatic collapse in optimism among Chief Financial Officers (CFOs).
According to Deloitte’s latest survey, business confidence has plummeted to its lowest point since Covid, with a net 26% of CFOs feeling more pessimistic about their business prospects than they did three months ago.
While confidence has not yet fallen to the historic lows of 2020 and 2022, the picture is bleak. Reeves’ insistence on raising National Insurance Contributions (NICs) has left businesses scrambling to cut costs, with CFOs naming cost-cutting as their top priority for the eleventh consecutive quarter. A staggering 52% of finance leaders said reducing costs was a strong priority, underscoring the relentless squeeze Labour’s economic mismanagement is putting on UK companies.
Businesses Brace for the Worst Under Labour
The broader outlook for UK corporates is equally grim. A net 58% of CFOs expect discretionary spending to be slashed, while hiring intentions have nosedived to a four-year low. Employment expectations are at their weakest point since the pandemic began in early 2020, with only 18% of finance leaders believing it’s a good time to take on additional risk. This is the lowest risk appetite seen in five quarters, as Reeves’ budget has forced businesses into survival mode.
Ian Stewart, Deloitte’s Chief Economist, didn’t mince words:
“With cost control to the fore in the wake of the Budget, CFOs have trimmed expectations for corporate investment, discretionary spending and hiring in the next 12 months.”
Despite Stewart’s cautious optimism about modest UK growth later in the year, it’s clear Labour’s policies are choking the private sector. The promised benefits of Labour’s economic plans have yet to materialise, leaving businesses to bear the brunt of Reeves’ ill-conceived strategies.
Inflation Worries Ease, but Damage is Done
CFOs expect wage pressures to ease in the coming year, with average wage increases slowing from 4.6% last year to a predicted 3.2% in 2025. They also anticipate the Bank of England will reduce interest rates by 75 basis points, bringing them to 4.0% by year’s end. While this provides some relief, it comes too late for businesses already battered by Labour’s tax hikes and regulatory burdens.
Credit conditions have marginally improved compared to 2023, with 41% of CFOs reporting credit availability. However, with 49% still rating credit as costly, access to financing remains a significant challenge—one exacerbated by Labour’s refusal to create a pro-business environment.
Labour’s Competitiveness Crisis
Concerns over the UK’s competitiveness are escalating. The survey shows that Britain’s attractiveness as a destination for investment has sharply declined, with a net -63% of CFOs saying it has worsened over the past decade. While the UK still ranks higher than other developed European economies, it lags far behind the United States, which CFOs rated as the most attractive investment destination by a wide margin.
Ian Stewart highlighted the stark reality:
“The UK ranks as a more attractive location for investment than the euro area, but overall, the US ranks by some margin as the most attractive destination for business investment, highlighting the competitive challenge posed by a fast-growing US economy.”
Meanwhile, India and the Middle East have seen significant increases in their attractiveness for investment, leaving the UK struggling to compete on the global stage under Labour’s watch.
Geopolitics Adds Fuel to the Fire
Geopolitical uncertainty remains the top external risk for businesses, as it has been for 10 of the last 12 quarters. The proportion of CFOs reporting high or very high levels of external uncertainty has risen to 40%, a one-year high. Combined with Labour’s policies, this uncertainty creates an environment where businesses are hesitant to invest, hire, or take risks.
Conclusion: Labour’s Economic Incompetence on Full Display
Rachel Reeves’ budget and Labour’s broader economic policies have left UK businesses reeling. From rising tax burdens to a lack of support for investment, Labour’s mismanagement has forced CFOs into a defensive posture, prioritising cost-cutting over growth. With hiring expectations at historic lows and the UK’s attractiveness for investment in freefall, Reeves and Starmer are steering Britain’s economy towards stagnation.
Labour claims to champion working people, yet their policies are crippling businesses, limiting job creation, and eroding the country’s competitiveness. As the private sector tightens its belt, the blame for this economic malaise lies squarely at Labour’s door. Britain deserves better than this shambolic excuse for leadership.
Source: Deloitte
