The construction sector experienced its most significant output decline in five and a half years, according to a recent S&P Global survey. The purchasing managers’ index (PMI) fell to 39.4, indicating a sharp downturn across all sub-sectors, particularly housing, which dropped to 35.4. Investor confidence waned due to a lack of new projects and budget speculation. Thomas Pugh, chief economist at RSM, noted: “Pre-budget speculation about large tax rises was having a significant negative impact on business confidence.” However, he added that sentiment should improve in the months ahead as confidence improves after the Budget.

The Institute of Chartered Accountants in England and Wales (ICAEW) has urged the Government to consider a single VAT rate to enhance business confidence after the Autumn Budget. A survey revealed that over 70% of members expect negative impacts on their businesses, with 22% anticipating a “very negative” effect. Iain Wright, chief policy and communications officer at ICAEW, stated: “This was not the Budget to deliver a much-needed confidence boost to UK plc.” The ICAEW said the complexity of the current VAT system hampers growth and innovation.

Concerns about the future of small businesses are rising, with over 75% of adults worried, particularly those aged 25 to 34. A recent NFU Mutual survey revealed that 23% of respondents are “very concerned” about small enterprises. Despite challenges like high costs, 90% of consumers have shopped at small businesses recently. Encouraging shoppers to support small firms, Zoe Knight, head of commercial at NFU Mutual, said: “The economy has seen plenty of challenges for small businesses over the last 12 months, and uncertainty will continue for many in the face of tax changes which are due to come in next year.”

Businesses in the UK laid off staff at the fastest rate since the pandemic in the run-up to the Budget, with employment falling by 1.8% in November. According to a Bank of England survey of over 2,000 firms, a further drop of 0.2% is expected in the next year. Rob Wood, chief UK economist at Pantheon Macroeconomics, said the survey was consistent with a 20,000 drop in private sector employment in November followed by an 18,000 fall in December. Unemployment has risen to a four-year high of 5%, with 180,000 jobs lost since the Chancellor’s first Budget. David Morrison from Trade Nation highlighted that government rhetoric has undermined business confidence.

The UK Government plans to remove the £118,000 cap on unfair dismissal compensation, raising concerns among employment experts that bosses will become “more cold blooded” during probation periods. Colin Leckey from Lewis Silkin warned that uncapped compensation could lead to increased claims and discourage hiring. He stated: “This does not sound like a recipe for growth.” Elsewhere, Dan Pollard, a partner at Charles Russell Speechlys, said: “Today’s development is frankly bonkers…unless introduced overnight it has the potential to create a bloodbath as employers seek to exit underperforming senior staff ahead of time.” Meanwhile, the implementation of protection from unfair dismissal for workers after six months will be brought forward to January 1, 2027, a move welcomed by Angela Rayner. The Employment Rights Bill will also include measures for zero-hours contracts and penalties for employers who obstruct union activities.

The UK hospitality sector may lose another 100,000 jobs due to recent Budget announcements, warns Allen Simpson, CEO of UKHospitality. He said that rising minimum wage and business rates will heavily impact youth employment, as workers aged 16 to 24 represent 10% of the workforce but fill half of hospitality roles. The sector has already lost 100,000 jobs since last October. Simpson noted: “Employing people at the start of their career is increasingly expensive.”

Tax fears prompted savers to withdraw approximately £600m from their pension pots before the Budget, according to Michael Summersgill, CEO of AJ Bell. He noted that speculation about potential cuts to tax-free pension lump sum withdrawals created anxiety among clients. In the end, the Treasury ruled out changes to the lump sum rules. However, the Government pushed ahead with plans to limit cash Isas allowances for under-65s, a move Summersgill described as “crazy” and a retrograde step. The overall annual allowance for all Isa products has been kept at £20,000. However, savers under the age of 65 will only be allowed to put £12,000 a year into cash Isas from April 2027.

David Lammy has refused to rule out reversing Brexit as government ministers increasingly push for closer ties with the EU. Although the Prime Minister is pledging to abandon Brexit as a “template” for future policy, he has so far rejected rejoining the customs union, a move that would breach Labour’s manifesto. However, Mr Lammy told a podcast it was “self-evident” that other countries had “seen growth” after joining the customs union. Responding to the news, Dame Priti Patel, the shadow foreign secretary, said Labour would “take us into the EU by the back door,” adding: “Rejoining the customs union or single market would be a total betrayal of the Brexit vote.”

Young adults in the UK are embracing entrepreneurship, with 67% of 18-34 year-olds interested in starting a business, according to a report by financial services firm Block. Despite a decline in business confidence and rising job losses, one in ten young people plan to launch a venture within the next year. However, traditional finance is hindering their ambitions, with 50,000 small firms denied loans annually, resulting in a £4bn economic loss. John O’Beirne, CEO of Squareup International, commented: “The ambition to start and grow businesses is there, but many entrepreneurs still find the financial system stacked against them.”