Swelling cost burdens and higher tax bills are eating into UK businesses’ confidence in the country’s economic prospects, reveals a fresh survey published today.
Severe inflationary pressures sourced from the Russia-Ukraine war sending energy prices higher and ongoing supply chain disruption has muddied the outlook for the UK economy.
The world’s economic watchdog, the International Monetary Fund (IMF), yesterday downgraded UK growth forecasts this year to 3.7 per cent from 4.7 per cent off the back of a severe cost of living crunch triggering a spending slowdown.
Employers’ confidence levels slumped to minus 11 in the three months to March after giving up gains notched at the beginning of the first quarter and remaining at the same level during the worst of the Omicron outbreak, according to the Recruitment and Employment Confederation (REC).
The first quarter of the year has seen the Kremlin send troops into Ukraine and the rate of prices in Britain hitting seven per cent, the highest level since 1992.
Confidence was likely also knocked by the looming 1.25 percentage point hike that hit firms on 6 April.
“Businesses are seeing tax rates and uncapped energy costs rise, as well as pressure on salaries from staff who are seeing their own bills go up. So it is no surprise that firms are more concerned about the outlook,” Neil Carberry, chief executive of the REC, said.
Despite the worsening prospects for the UK economy, employers’ hiring intentions remain strong.
Demand for permanent staff in the short term jumped nine percentage points to a net 28, while medium term hiring intentions climbed seven points, illustrating businesses still expect to capitalise on the UK economy’s strong rebound from the depths of the Covid-19 crisis.
Official figures indicate joblessness in the UK is falling. However, the stats have been flattered by higher levels of economic activity and fail to account for a sharp drop in self-employment rates.