The Business Confidence Monitor (BCM) is a quarterly survey of 1,000 UK-based ICAEW Chartered Accountants that provides an overview of business conditions and the health of the UK economy. In the first of our business confidence snapshots, Edward Napper explores key findings, highlights sector-specific trends and offers insights into what these shifts could mean for businesses navigating the months ahead.
We’ve seen first-hand how economic uncertainty, rising costs, and regulatory pressures are shaping decision-making in 2025. The report for the East of England reflects many of the same concerns that our clients are voicing regarding the tax burden and market demand. Here are some key takeaways:
UK business confidence drops to three-year low
The BCM UK index fell sharply in the first six months of 2025, dropping from -3 in Q1 to -4.2 in Q2. This is the lowest since 2022, driven by tax concerns, rising costs, and slowing domestic sales. Over half of businesses cited tax as a growing challenge, particularly with much speculation over Rachel Reeves’ up-and-coming Budget announcements, while expectations for sales and employment had also weakened.
Sector trends
Confidence varied across sectors, with manufacturing, property, and retail most affected. Exporters turned pessimistic for the first time in three years, while IT, construction, and energy firms showed modest optimism. Despite the challenges, easing salary growth suggests a slightly improved outlook for inflation.
East of England confidence falls
Mirroring the national picture, the East of England index fell sharply, dropping from +3.1 in Q1 to -4.8 and reaching its lowest level since Q4 2022. This marks a more pessimistic outlook compared to both the national average (-4.2) and our region’s historical average (+4.3).
The decline in sentiment is partly attributed to April’s employer National Insurance contributions increase and growing uncertainty around global trade policy. There was also notable pessimism emerging in the business services and retail sectors.
Resilient growth and emerging challenges
Despite the dip in confidence, businesses in the East of England posted some of the strongest domestic sales and export growth in the UK over the 12 months and remain optimistic about future performance. The region also led the UK in annual profits growth.
However, concerns over the rising tax burden and fluctuating consumer demand continue to weigh heavily on sentiment. Employment growth has been relatively strong but is expected to ease in the coming months.
Investment intentions and inflation trends
Input costs, selling prices, and salary inflation all rose faster in East than the UK average through to Q2 2025, though these pressures are expected to ease.
Looking ahead, businesses plan to increase capital investment while scaling back R&D budget growth, yet both are projected to exceed national averages, signalling a continued focus on long-term development despite the economic climate.
The headwinds facing businesses are numerous and complex. We’re here to support clients with technical and commercial advice.
Learn more and get advice
Please feel free to contact me for a complimentary call about the issues raised in this update, or any other challenges your business is facing.
If you’d like to know more about the findings, you can view the latest BCM 2025 Q2 report for the East of England on the ICAEW website.
Please note that this content is not intended to give specific technical advice. It is designed to highlight some of the key issues rather than provide an exhaustive explanation of the topics. Professional advice should always be sought before action is either taken or refrained from as a result of information contained herein.
