Britain’s private sector spent much of the autumn effectively “in limbo”, delaying investment and hiring decisions amid weeks of budget speculation that has left business leaders hurt and uncertain about the government’s intentions.
The latest monthly survey from the Confederation of British Industry (CBI) shows that businesses have significantly downgraded their expectations for activity in the coming months. The composite measure of expected private sector activity fell to -27 in November, down from -20 in each of the previous two months, pointing to a widespread setback in decision-making as rumors of tax hikes intensified.
This cautious mood was followed by a significant decline in output, with the CBI reporting that private sector activity fell by the most since August 2020.
CBI deputy chief economist Alpesh Paleja said the loss of confidence was closely linked to weeks of speculation about the Chancellor’s plans. “Growth expectations weakened in November, which may be partly due to jitters ahead of last week’s Budget,” he said. “Companies tell us that much of the month was in limbo, with large discretionary spending and investments put on hold.”
Paleja added that while last week’s budget brought further costs for employers, including new social security requirements for salary sacrifice pension contributions, the government’s creation of £21.7 billion of fiscal space could provide some stability going forward.
A separate survey suggests business sentiment remained fragile even after the budget was passed. Research from WPI Strategy found that more than half of business leaders now expect to cut their hiring plans as a result of the announced measures, while a significant proportion expect their companies to suffer in the new tax environment. Many respondents expressed concerns about rising labor costs and the cumulative burden of recent tax changes.
The run-up to the Budget has itself become a flashpoint for criticism, with business groups pointing to the Treasury’s heavy reliance on anonymous briefings that have repeatedly suggested a £30bn deficit in the public finances. These warnings fueled fears of drastic tax increases. Fears were later undermined by the Office for Budget Responsibility (OBR), whose chairman Richard Hughes confirmed after the forecasts were presented on October 20 that a reduction in productivity had not wiped out the chancellor’s fiscal space.
Both Rachel Reeves and Keir Starmer have denied misleading the public, despite the government’s rhetoric coming under increasing scrutiny in early November. The dispute has raised questions about how the Treasury manages expectations ahead of fiscal events and whether pre-Budget communications themselves have become destabilizing.
The Bank of England has also noted the consequences of ongoing uncertainty. It said tax rumors contributed to slower growth in the third quarter, while new figures showed a significant slowdown in the property market. Net mortgage borrowing fell to 4.3 billion pounds in October and the number of mortgage approvals fell to 65,000, the lowest level since February 2025. Analysts say the decline reflected a pause in activity as households waited to see whether income taxes or thresholds would change.
According to Anthony Codling of RBC Capital Markets, the decline in approvals “confirms that the long period of budget speculation has had a negative impact on real estate market activity” and contributes to the overall feeling of economic restraint.
As business leaders come to terms with the budget’s measures, many argue that the government must now prioritize restoring stability and rebuilding confidence after a tumultuous period leading up to the budget that slowed investment, unsettled bosses and embarrassed the private sector.
