Labour’s tax plans knock UK business chiefs’ confidence

London: Optimism in the UK economy among company bosses plummeted in August because of worries about likely tax increases from the new Labour government.

The Institute of Directors said on Sunday (Sep 1) that its economic confidence index dropped to a reading of -12, down from a three-year high of +7 registered in July.

The scores tally the percentage difference in respondents who say they are pessimistic about the economy against those who say they are optimistic.

“The news-flow in recent weeks on employment rights and autumn tax rises has dented confidence in the environment for business in the UK,” said Anna Leach, the lobbying group’s chief economist.

She urged the government to engage more with businesses on its plans to bolster workers’ rights, which company leaders have said may stifle growth.

The survey of 715 company leaders showed a sharp increase in concern over business and employment taxes. The Labour Party, which came to power in a landslide Jul 4 election, is expected to raise taxes after accusing the previous Conservative administration of leaving it with a £22 billion (S$37.7 billion) fiscal black hole.

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Chancellor of the Exchequer Rachel Reeves has ruled out increases to the UK’s main revenue drivers, such as income tax, National Insurance and value added tax.

That has raised concerns that she will use October’s budget to raise levies such as the capital gains tax.

While in opposition, Labour proposed a radical expansion of workers’ rights but appears to have rowed back some of the plans.

The survey also revealed a steep fall in directors’ confidence in their own companies’ prospects, with the index at +23 in August compared with +36 in July.