(Bloomberg) — 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 Sunday that its economic confidence index dropped to a reading of -12, down from a three-year high of 7 in July. The scores tally the percentage difference in respondents who say they’re pessimistic about the economy against those who say they’re 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 July 4 election, is expected to increase taxes after accusing the previous Conservative administration of leaving it with a £22 billion ($28.9 billion) fiscal black hole.
Chancellor of the Exchequer Rachel Reeves has ruled out increases to the UK’s main revenue drivers, such as income tax, National Insurance and VAT. That’s raised concerns she’ll 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 IoD’s survey also revealed a steep decline in directors’ confidence in their own companies’ prospects, with the index at 23 in August compared with 36 in July.
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