Business confidence index

Over the five-year period through 2025-26, the BCI is forecast to decline at a compound annual rate of 0.1%. In April 2019, business confidence in the United Kingdom hit its then lowest level since the Brexit vote, with prolonged uncertainty, political instability, a stalemate in EU withdrawal agreement negotiations, a pressured exchange rate and so forth inducing deep pessimism among UK businesses. However, in addition to a December 2019 general election consolidating Boris Johnson's premiership, the United Kingdom eventually withdrew from the EU bloc on 31 January 2020 subsequent to a series of delays. Yet, while this provided a degree of clarity with regards to the direction Brexit negotiations would likely take during a transition period through December 2020, indicative optimism among certain corporations proved insufficient enough to offset a lack of confidence across the comprehensive business sector.

Towards the tail-end of 2019-20 and through 2020-21, the COVID-19 (coronavirus) pandemic and resultant economic shock ushered in a new wave of pessimism across business markets. First identified towards the tail-end of 2019, in Wuhan, Hubei province China, the coronavirus pandemic spread globally, with the domestic situation gaining momentum in February 2020 and worsening thereafter; the World Health Organisation (WHO) officially declared the outbreak a pandemic in March 2020. A year removed from its onset, the coronavirus pandemic remained a significant threat to public health and continued to severely disrupt supply chains, currency markets, stock markets, commodity markets, consumer demand and business activity. Accordingly, the UK and global economy endured a period of lacklustre economic prospects. Exemplary of the harshness of initial market shocks, the pound sterling plunged to a 35-year low against the US dollar on 18 March 2020 (£1 = US$1.17), while WTI oil prices moved into negative territory for the first time in history on 20 April 2020 - it traded as low as -US$40.32 (-£32.41) per barrel.

In order to allay concerns among business and consumer groups, the UK government introduced a number of stimulatory measures intended to give a shot in the arm to the economy amidst prevalent disruption. For instance, Budget 2020, announced on 11 March 2020 by Chancellor Rishi Sunak, committed to the biggest rise in public borrowing for 30 years and an end to a decade of Conservative austerity, with public sector net investment set to rise from close to 2% of national income, to 3%. Sunak maintained this stance in the Budget 2021 announcement on 3 March 2021, which provided further support of £65 billion in 2020-21 and 2021-22. Taken together with earlier stimulus packages, which include a massive overhaul in capital investment, direct support for the economy comes to £407 billion – the largest peacetime support package for the economy on record.

Meanwhile, the BoE opted to slash the base interest rate to a record low 0.1% on 19 March 2020, having since been held at this level through to the time of publication (9 September 2021), and the government, among a plethora of temporary business support schemes, launched the Coronavirus Business Interruption Loan Scheme on 23 March 2020 to help firms weather the economic storm. The BoE, on 17 March 2020, also introduced the Covid Corporate Financing Facility (CCFF), which is designed to support liquidity among larger firms, helping them to bridge coronavirus disruption to their cashflows through the purchase of short-term debt in the form of commercial paper.

On 16 December 2021, the BoE raised the base rate back to its 0.25% level – the first rise in more than three years – and hiked again on 3 February 2022, to 0.5%, with the latter representing the first tightening of monetary policy in consecutive BoE Committee meetings since 2004.

Despite emergency stimuli intended to drive business activity and notwithstanding positive news with regards to the UK's accelerated rollout of a COVID-19 vaccine, the general consensus in business markets is a mood of net pessimism, with trading conditions remaining difficult - comprehensive public health restrictions remained in place through the 2020-21 fiscal year - and recruitment activity proving lacklustre, as furloughing remains prevalent and as insolvency pressures remain significant. In 2020-21, the BCI declined by 0.3%, averaging 99.2 points over the fiscal year. BCI recovered by 2.6% in 2021-22 on an annual basis, as the reopening of the economy sparked hope for a corresponding recovery in business activity levels.

However, over the course of 2022-23, the UK's level of business confidence, as measured by BCI declined by 1.7%, to reach 100.1 points. However, this is still indicative of net optimism as it is above 100 points. The fall in BCI is a product of an array of macroeconomic headwinds UK business will face with over the current year. These include rising inflation caused by the Ukraine-Russia fuelled energy and supply chain crises which exceeded wage growth. In October 2022, the UK's CPI inflation rate peaked at 11.1%, marking the highest level since 1981.

In the financial year 2023-24, the UK's Business Confidence Index declined by 0.8%, primarily due to lingering inflationary pressures and high interests rates tempering business activity. These measures elevated operational costs, leading businesses to reduce hiring and investment, thereby dampening overall confidence.

In 2024-25, despite interest rates falling three times from highs of 5.25% at the beginning of the period to 4.5% by February 2025, business confidence slipped by 0.2%. This was This decrease was primarily due to increased employer National Insurance contributions and a higher National Living Wage introduced in the October budget, which elevated operational costs and dampened business sentiment.

In 2025-26, UK BCI is expected to fall by 0.2%, primarily due to the imposition of significant tariffs by the US under president Trump. Despite reaching a trade deal with the US, the UK still faces a baseline 10% tariff on most exports to the US. The quick changes in decisions from President Trump regarding tariffs generates uncertainty for businesses, which has further contributed to the fall in business confidence.