Fears were raised that the UK economy is slipping into the red today as a survey showed business confidence crashing after the Budget.
A report from consultancy firm BDO showed that optimism has plummeted to its lowest level in two years.
A tracker of activity also dipped by 3.2 points to 94.7 last month – the weakest in more than a year, with anything below 95 suggesting contraction.
The darkening picture comes after GDP barely scraped into positive territory in the third quarter, recording 0.1 per cent growth. The single month of September saw a 0.1 per cent fall in output, with revision of the data still possible.
Recession is technically defined as two consecutive quarters of shrinkage.
Businesses suffered a double whammy in October when Rachel Reeves unveiled a huge National Insurance contributions hike for employers and introduced an inflation-busting increase in the minimum wage.
Bosses have warned the measures will lead to job losses, shop closures and price hikes as they struggle to pay the additional costs.
Following the Budget, BDO reported that its optimism index for businesses had dropped to 93.49 in November, its lowest since January 2023 when firms were grappling with surging inflation and political turmoil sparked by the aftermath of Liz Truss‘s mini-Budget.
Businesses suffered a double whammy in October when Rachel Reeves unveiled a huge National Insurance contributions hike for employers and introduced an inflation-busting increase in the minimum wage
BDO said the fall was ‘likely to reflect businesses’ immediate reaction to announcements in the Autumn Budget,’ noting that confidence had dropped particularly sharply in the services industry, which includes retailers and other consumer-based firms.
Retail bosses have been among the fiercest critics of the Chancellor’s planned tax hikes, with the heads of M&S, Sainsbury’s, Amazon UK and Next among those warning the measures will lead to higher prices and job losses.
Even before the Budget – the biggest tax-raising package on record – ministers had been accused of talking the country into a downturn with gloomy assessments of the outlook after the election.
Asked this morning whether the economy was heading into recession, Lindsay James, investment strategist at Quilter Investors, told BBC Radio 5 Live: ‘We’re teetering on the edge of it.
‘The last GDP data we got out, quarter on quarter growth of just 0.1 per cent… we need to see a little bit better than that if we’re going to feel a bit more secure we can avoid recession.
A fall in production sparked the dip in GDP seen in September
‘But this is really just the fact that the Budget has caused a lot of uncertainty for employers who are concerned about the rise in national insurance contributions of course, as well as the minimum wage and tighter employment regulations too.’
Paul Dales, chief UK economist at Capital Economics, said: ‘With the economy having grown at the snail’s pace of just 0.1 per cent in the third quarter, such falls in business confidence increase the risk that the economy will contract in the fourth quarter.
‘That would be a ‘milestone’ that the government could do without.’