Rising costs. Squeezed margins. Frozen expansion plans.
You know things are rough when finance chiefs stop worrying about global crises and start panicking about home turf. UK CFOs are sounding the alarm: the country’s falling behind, and Labour’s growth agenda isn’t landing.
Despite Rachel Reeves rolling out the red carpet for investment heavyweights like JP Morgan’s Jamie Dimon and Goldman Sachs’ David Solomon, confidence is cratering fast. Fresh survey data shows CFOs are battening down the hatches, slashing spending, and abandoning growth plans. Meanwhile, economic output is sliding backward. Not exactly the “growth mission” Labour promised.
Finance Chiefs Brace for Rising Costs and Shrinking Margins
Deloitte’s September survey of 68 top executives—including 11 from FTSE 100 firms—revealed some brutal truths about UK business sentiment.
84% of CFOs expect operating costs to climb, forcing leaders into defensive mode. Nearly half (47%) anticipate their profit margins will shrink, the worst reading since Q2 2023.
The response? Cash hoarding and cost-cutting. Finance chiefs are prioritising survival over expansion, strengthening balance sheets by building reserves and paying down debt.
Ian Stewart, Deloitte UK’s chief economist, noted a shift in executive concerns. CFOs aren’t losing sleep over Ukraine any more—they’re worried about the UK’s competitiveness problem.
“CFOs have responded by strengthening balance sheets through a focus on cost control, building cash reserves, and reducing debt,” Stewart said.
Expansion Plans Put on Ice
When businesses get nervous, growth takes a backseat. Deloitte’s data confirms it:
- Only 25% plan to launch new products or services
- Just 12.5% will invest in new capital
- A mere 11% are considering acquisitions
Translation? UK firms are in wait-and-see mode, not invest-and-grow mode.
Inflation expectations are holding steady at 3.2% over the next year, while wage growth has averaged 3.5% recently. That gap might seem small, but it’s enough to squeeze margins when demand isn’t keeping pace.
Labour’s Tax Hikes Hit Business Output Hard
Monday brought more bad news for Chancellor Reeves. BDO’s latest survey showed business output falling below long-term trends, with the services sector posting its sharpest monthly drop since September 2022.
The culprit? Labour’s hike to employers’ national insurance contributions (NICs). Firms say higher hiring taxes are dampening activity and making them think twice about adding headcount.
Employment sentiment just hit a 13-year low. Fewer businesses expect to hire in the coming year—a worrying sign for an economy that desperately needs job creation.
BDO’s Scott Knight didn’t sugarcoat it: “The uptick we saw in August was a false dawn. While there is a kernel of hope amongst the mid-market, it’s fragile and they need clarity from the top before they can take any meaningful investment risks.”
What This Means for Labour’s Growth Agenda
Here’s the uncomfortable truth: businesses aren’t buying what Labour’s selling.
Reeves can schmooze Wall Street titans all she wants, but if UK-based CFOs are slashing budgets and freezing hiring, international investors will notice. Confidence is contagious—and so is pessimism.
The government’s pushed higher taxes on employers to fund public services, but the immediate effect is clear: businesses are retrenching, not expanding. Without private sector growth, Labour’s economic plans risk stalling before they even get rolling.
The Bottom Line
UK finance chiefs are voting with their wallets, and the verdict isn’t pretty. Rising costs, shrinking margins, and Labour’s tax hikes have pushed businesses into defensive mode. Expansion’s off the table. Hiring’s frozen. And confidence in the UK’s competitiveness is slipping.
If Labour wants to revive its growth agenda, it needs to give businesses a reason to believe again—and fast.
Want to stay ahead of UK economic shifts? Keep an eye on CFO sentiment surveys and business output data. They’re the early warning system for what’s coming next.
FAQ
Q1: Why are UK finance chiefs losing confidence in the economy?
A: CFOs are facing rising operating costs and shrinking profit margins, with 84% expecting costs to increase. Labour’s tax hikes on employers have added pressure, pushing businesses into cash-preservation mode rather than growth.
Q2: What impact is Labour’s national insurance hike having on businesses?
A: The increase in employers’ NICs is dampening hiring and investment. Employment sentiment has hit a 13-year low, with fewer firms planning to add workers in the coming year.
Q3: Are UK businesses planning to expand?
A: Not really. Only 25% plan to launch new products, 12.5% will invest in capital, and just 11% are considering acquisitions. Most are focused on cost control instead.
Q4: How does UK competitiveness compare to other countries right now?
A: Finance chiefs believe the UK is falling behind rivals. Their main concern has shifted from geopolitical issues like Ukraine to domestic competitiveness problems affecting margins and growth prospects.
Q5: What does this mean for Labour’s growth strategy?
A: It’s a warning sign. If UK businesses remain cautious and international investors see domestic confidence cratering, Labour’s growth push could stall. The government needs to rebuild business confidence quickly.
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Effective Date: 15th July 2025
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