Adam Smith Institute Business Confidence Survey 2025

Foreword - Hon. Andrew Griffith MP, Shadow Secretary of State for Business and Trade

The results of this important ASI survey are shocking but are sadly no surprise. 

Business confidence is very poor across the board with 77% reporting ‘low or very low’ confidence in the UK’s business environment over the next few years.  The Jobs Tax raid – a rise in employer national insurance contributions while slashing the threshold at which they begin to be paid – is a top concern listed by many of the businesses surveyed.  So too more generally are the biggest tax raid in a generation imposed at what many in business saw as a ‘budget of broken promises’ and the surge in regulation on the horizon, both cited by 75% and 45% respectively. 

The message is clear.  Jobs are at risk or already going, we are in a per-capita “personal recession”.  Investment is down.  

Businesses have been ringing the alarm bells for months to little or no avail.  From a summer of trash talking the economy to a budget that trashed the economy we are all beginning to feel the pinch and pay the price for choices made by a Cabinet with the least business experience in it in modern history.

No government of growth would have chosen to raise taxes on jobs, bring back 1970s style trade unions, and pile on red-tape from both Whitehall and Brussels.

Sectors like retail, the UK’s largest private sector employer, and hospitality are on the front line of this attack and have made no secret of it.  These industries which have often provided the first rung on the career ladder to young people and a re-entry into the workforce for parents are now staring down the barrel at massive job losses the UK can ill afford with over 5 million already not working.

Meanwhile, the looming trade union inspired Employment Rights Bill being debated in Parliament will eliminate the UK’s relatively flexible jobs market, make Britain less competitive as a place to do business and create even more hurdles for the next generation to find their first job. Its expansion in union rights will take the UK back to the 1970’s in which the Adam Smith Institute was founded. Many businesses are already pausing hiring as a consequence.   

For those lucky enough to survive this onslaught, the decision to scrap BPR and tax family businesses will seem like salting the ground after the battle.

It is business that creates growth, jobs, and opportunity; it is entrepreneurs who create wealth and prosperity; and it is those who take risks who reap the rewards.

Those familiar with the ASI’s work might hold these to be ‘truths self-evident’ but too many at the top of politics don’t.  This is why the responsibility of organisations like the Adam Smith Institute is greater than ever.  Surrounded by politicians that simply don’t ‘get’ business, it is vital that those of us who do remind them.

Instead of a government that lauds and supports wealth creators we are seeing a real-life version of Ayn Rand’s Atlas Shrugged play out in the UK.  Businesses are despairing and capitulating, motivation to start a new venture has been sapped, and most worrying of all:  young people are increasingly turning away from the UK to seek a better life elsewhere.

At present, the situation is bad but not yet terminal.  The Government still has the opportunity to change course, to listen to businesses and to adjust its approach.  

It could delay or scrap altogether the damaging NICs threshold change that is putting over 100,000 part time jobs at risk.  It could shelve the trade union inspired Employment Rights Bill and consult with strivers rather than strikers.  

It could end its vindictive attack on the hyper-successful non-doms and family business owners who choose to fund the public services we rely on by choosing to live in the UK.

The best thing the Government could do right now would be to look at the results of this survey, contemplate the cliff edge it stands upon and take a step backwards not forwards. Without business there are no jobs, no growth, and no taxes to fund public services.

We Conservatives have a big job to do under new leadership, to reconnect with founders and entrepreneurs, learn from past gaps between rhetoric and actions when it comes to supporting small businesses and develop clear plans to properly move the dial when we next return to government.   That work has already started.

In the meantime, the ASI has rung the alarm bell on the growing business confidence crash that has gripped the UK, and the Government would do well to take a walk out of Trade Union Congress House and into the City before it’s too late.

Andrew Griffith MP, Shadow Business Secretary

Executive Summary

• Amidst growing concern over the UK’s long-term economic prospects, the Adam Smith Institute has conducted a survey of nearly 200 UK business leaders, who could collectively represent nearly 100,000 employees

• The survey paints a bleak picture for the Government - 77% of those surveyed reported ‘low or very low’ confidence in the UK’s business environment, with just 4% reporting ‘high or very high’ confidence.

• The average ‘Business Confidence Score’ across the survey was just 2.6/10, a sign of considerable private sector frustration with the UK’s current direction of travel.

• The single biggest issue raised was taxation on profits, with a full 75% of respondents citing this as a major concern. Price/wage inflation (71%) and high input/energy costs (64%) were also cited by a clear majority of respondents across the survey.

• Qualitatively, businesses raised a wide variety of concerns about the UK’s business environment, which often focused on high taxes, regulation, and structurally-high energy costs. Plans to increase the rate of employer National Insurance were a particular concern for a large number of the businesses surveyed.

• For a considerable number of medium-to-large businesses sampled, the threat of lawfare was a particular concern. As the Adam Smith Institute’s recent ‘Judge Dread’ paper demonstrates, the UK’s class-action explosion is undermining confidence in the UK’s business landscape, at a time when our country desperately needs more investment.

• The government must listen to these private sector concerns and address them with substantive policy changes. In the shorter term, the government should immediately reconsider its plan to increase employers’ NICs and corporate tax.

• In the longer term, for example, the Adam Smith Institute has previously recommended abolishing stamp duty, reforming existing planning and licensing rules, scrapping social value metrics in government procurement, and implementing an Italian-style annual flat fee to encourage wealth creators to remain in the UK.

About the Survey

In light of growing concerns about the UK’s business confidence landscape, the Adam Smith Institute’s first-ever ‘Business Confidence Survey’ aims to capture the scale of private sector frustration with the status quo in the UK and highlight particular ‘pain points’ experienced by business-people. Respondents were given an opportunity to provide both general and specific thoughts; these thoughts were collective using both qualitative and quantitative survey methods.

Responses were submitted anonymously, thereby allowing businesses to speak more freely about their concerns. Many of the businesses that we surveyed work directly with the Government; others might be concerned about expressing their frustrations openly, for fear of being perceived as ‘political’. However, all responses were subjected to review and assessment to ensure validity.

All in all, we surveyed 192 UK business leaders, seeking responses from a wide variety of sectors and geographies. Collectively, these 192 business leaders constitute a diverse cross-section of the UK business landscape, and represent more than 100,000 employees.

Sectoral Breakdown

32.5% Financial and Professional Services

16.2% Retail

11.5% Hospitality and Leisure

11% Technology and Digital Services

9.4% Manufacturing

5.8% Education

4.7% Construction 

4.7% Real Estate

4.2% Communications

The largest cohort of business leaders surveyed came from the world of financial and professional services, a sector which contributes more than £200 billion to the UK economy annually, while sustaining more than 1.17 million jobs. However, our survey also received a substantial contribution from those involved in retail and hospitality, representing a combined 28% of businesses surveyed. As our 2024 research paper ‘On The Rocks’ demonstrates, these sectors are currently struggling against a challenging set of circumstances, with high energy costs, high rent, high taxation, and cumbersome regulations contributing to a ‘perfect storm’ for these sectors in the wake of lockdown-era closures.

This diverse cross-section features businesses big and small. 79% of businesses surveyed fall into the ‘small business’ category (0 to 49 employees), with 91% falling into the ‘small and medium sized (SME)’ category (0 to 249 employees). While this figure is high, it is lower then the overall proportion of UK businesses which fall into the SME category, which stands at 99.8%. Though large businesses (more than 250 employees) make up a small proportion of total UK businesses, they contribute disproportionately to the UK economy - despite making up just 0.2% of total businesses, these large firms create 40% of employment in the UK and 52% of total turnover. 

As such, the decision to overrepresent these businesses in our survey is a deliberate one - in order to ensure that the UK is working for business, the Government will need to ensure that it engages actively with these large businesses, who are responsible for an outsized contribution to the UK’s overall economic health. Nevertheless, our survey still reflects the fact that the vast majority of UK businesses fall into the SME category.

Key Findings

Across all groups surveyed, one story emerges clearly - the state of business confidence in the UK represents a significant cause for concern.

Businesses were first asked to provide an overall assessment of their confidence in the UK as a business environment, over the next year. Against this metric, a striking 77% of businesses reported ‘low or very low’ confidence in the UK as a business environment. A further 19.2% of businesses surveyed reported ‘medium’ confidence in the UK as a business environment, while a scant 3.8% reported ‘high or very high’ confidence. This ‘temperature check’ question aims to gauge overall sentiment amongst business leaders - and in this case, it paints a starkly negative picture. 

Looking at the same data through another lens, the median response to this ‘overall assessment’ question was 2.6/10 - a remarkably low score, which indicates generalised private sector frustration with the UK’s business environment. 

With this negative picture in mind, the remainder of our survey was dedicated to understanding why business leaders are concerned about the overall state of the UK economy, while also identifying some more positive stories about the UK’s prospects.

When asked to identify which features of the UK business landscape are currently a cause for concern, business cited a wide variety of challenges, both general and specific. The most common response was high taxation on profits, which was specifically identified as a concern by 74.5% of businesses - 58.9% also reported concern with the high level of taxation on outputs, such as duties and VAT. 

When thinking about taxation, the single issue mentioned most often by respondents to our survey was the Government’s plans to lower the threshold at which employers will begin paying National Insurance, alongside plans to increase the overall rate of National Insurance Contributions (NICs). Announced last Autumn, those involved in the Retail and Hospitality sectors expressed significant concern about the impact that these changes will have on their ability to train sustainably.

However, concern about planned changes - and about taxation in general - was by no means confined to those working in retail and hospitality:

“The tax we are expected to pay kills ambition. You are punished for working hard and taking risks. I am a small business stuck at £90,000 turnover - it doesn’t work to go above the VAT limit as I would then need to get to £150,000 as I would have to hire someone else. I’d be working harder just to make the same profit. Increase the VAT level. I’ll turn over say £110,000 and you’ll get tax on the extra £20,000 profit. The Government are short sighted on the VAT issue. Most small businesses I know are all doing the same.”

- Real Estate, Small Business, East Midlands

A large number of businesses surveyed expressed frustration with the overall level of taxation in the UK - a frustration which was often coupled with concerns about the fact that businesses and high-net-worth individuals are often choosing to move to other jurisdictions with more favourable climates for business.

“We are a small business, but our service offering is expensive, and most of our clients are international business professionals. A high number are leaving now due to gruelling 40 percent cap gains tax and 40 percent inheritance tax.”

- Financial and Professional Services, Small Business, London

This concern echoes the findings of the Adam Smith Institute’s recent ‘Millionaire Tracker’, which indicated that the UK is losing more millionaires per capita than any other developed country. According to our tracker, the share of the population who are millionaires will fall by 20% by 2028. 4.55% of British residents are liquid millionaires in 2024, however, it is forecast that this will fall to 3.62% by 2028. Many millionaires are wealth creators, setting up businesses and employing people across the UK, so their departure is a worrying leading indicator of economic health and growth prospects. This is especially true for liquid millionaires, who tend to be entrepreneurs and business owners who have sold their enterprises for cash or shares, and are often looking to continue investments into the economy.

“The growing lack of confidence and the departure of 10,000 rich people who invested, hired, and spent in the UK.”

- Small Business, Financial and Professional Services, London

This ‘human capital flight’ has huge second-order consequences for the UK economy. High net-worth individuals are significantly more likely to invest in businesses; the large-scale departure of these businesses further restricts the pool of investment available for UK firms, a concern which is particularly acute for those working in innovative firms which rely on outside investment to grow and scale.

“Wealthy investors leaving in droves; incentive for innovation limited and innovation activity moving overseas.”

- Education, Small Business, South-East

This concern about the UK’s shrinking pool of available capital is combined with broader concerns that the UK is failing to capitalise on the opportunities presented by innovation:

“No clear backing of frontier technology. France is committing clear sums and government resources. we have only had words. We are at the beginning of the most impactful technology revolution since the Internet. We have fantastic institutions - UCL being prime amongst them as a global leader in AI and spin-outs - we have fantastic talent and some good private funding for innovation. We have a government that seems ready to squander this and what ought to be a position of leadership globally. This will have severe consequences for the long term prosperity of the country given the reach and consequence this technology revolution will have.”

- Technology and Digital Services, Small Business,  London

A clear majority (64%) of businesses surveyed also highlighted high energy and input concerns as a concern - a concern which was coupled with frustration about the UK Government’s rhetoric about the energy sector in general:

“Poor support to North Sea and onshore oil and gas production. Government does not understand how nurturing and promoting the domestic sector will generate employment, investment and  taxation rather than demonising a domestic industry at the expense of international oil and gas markets. No strategy on energy security. They should look at how Norway developed and enticed investment to grow its sector and not rely on Russia.”

- Manufacturing, Medium-Sized Business, London

A further 45% of businesses surveyed indicated that regulation of products or operations were a serious cause for concern. 37% specifically cited concerns about regulation around ESG (environmental, social, governance) rules. This concern was particularly acute for those working in high-value sectors, such as financial services and the tech sector:

“Regulations are anti business and anti innovation. It takes too long to market to UK institutions because their compliance departments have been given so many box ticking exercises. It also takes too long to convince risk managers of a fund's performance potential because of liquidity and daily matching requirements.”

- Financial and Professional Services, Small Business, London

“The main legal and regulatory challenges over the past year have been navigating compliance in areas like data protection, financial regulations, and platform liability. The UK’s regulatory landscape can be complex and slow-moving, making it difficult for innovative ventures to scale efficiently. There’s also a lack of clear guidance for tech-driven businesses operating in emerging sectors, adding uncertainty and extra costs. Access to funding is another issue, as many investment incentives are tied to rigid criteria that don’t always align with new business models. These factors create unnecessary friction in an environment that should be fostering innovation.”

- Technology and Digital Services, Small Business, London

However, concerns about regulation were not confined to these sectors. Coupled with concerns about taxation and input costs, those in the Hospitality and Leisure Sector also expressed concerns about regulation around product safety and employment. A number of businesses operating in this sector specifically highlighted the upcoming Employment Rights Bill as a cause for concern, expressing frustration with the fact that the planned changes in that bill will make it more difficult to manage the workforce in sectors which rely on a high turnover of staff, or a high proportion of temporary staff:

“Just to sell burgers I have a 200 page manual complying with the regulations, and have to spend several hundred pounds a year continually getting equipment certified and recertified. On top of that, as soon as you want to hire anyone, even on an ad hoc or occasional basis, you end up with huge amounts of extra tax and legal obligations…just to get someone on the books to help for one day at a festival.”

- Hospitality and Leisure, Small Business, South-East

There is also concern about the extent to which the volume of regulation in the UK is creating a system in which competition is stifled - when only large, established businesses have the cash flow required to address this increasing compliance burden, smaller and more dynamic businesses are prevented from providing real competition to incumbents:

“Ofcom Third Party Security Standard has increased regulation and has created a lot of demand on the supply chain, and limited market competition by restricting which vendors are available due to the demanding requirements placed upon the regulation. It's a good regulation, but when only the biggest 5-6 vendors of each category are big enough to comply, it limits market forces.”

- Communications, Large Business, London

One area of regulation which received particular attention was the planning system, an issue that the Adam Smith Institute has worked to highlight over the past two decades. Concern about this area of regulation was concentrated amongst - but not confined to - businesses in the Real Estate sector, who express frustration with the extent to which planning rules stifle their ability to deliver homes at pace and scale.

“New fire safety planning regime has made building tall buildings in London (which is something that we frequently do) incredibly difficult.”

- Real Estate, Large Business, London

“Planning regulations are getting harder, not easier despite government spin, more rules etc . Stamp duty is a major hurdle. Biodiversity net gain is another huge impediment to development, and high interest rates we thought were going to fall a brake on the market.”

- Real Estate, Small Business, London

If regulation is a problem for the private sector, then this problem is as its most acute when the private sector works alongside the public sector. Businesses with an active relationship with the public sector expressed continued concern about the failure of the British state to respond quickly and effectively to new opportunities. Many of the businesses surveyed were concerned that Government compliance rules “bear no relevance to business”, preventing the public sector from seizing opportunities presented by external actors from the world of business.

“We deal with the NHS. It is difficult for SMEs to work with the public sector because of the length of time everything takes. It causes problems for cashflow, innovation, product management - everything.”

- Technology and Digital Services, Small Business, North-West

“We work for government-funded agencies (defence, utilities and nuclear decommissioning for example) - their staff work ethic, WFH and productivity has never recovered from the Covid pandemic - and so letting suitable contracts out to the supply chain has stalled.”

- Engineering, Small Business, North-West

“Red tape generated by supply chain supplier approval, especially for SMEs, has become a real burden - for example creating DEI and Net Zero policies that bear no relevance to our business consumes vast amounts of time to get on a supplier database. MoD’s JOSCAR system is a classic case of this and has ballooned massively over the last couple of years.”

- Engineering, Small Business, North-West

A smaller, but still significant, number of businesses cited the threat of lawfare and legal action as a concern. This was particularly true for medium and large businesses - which, as mentioned previously, contribute an outsized proportion of employment and turnover to the British economy. More than 1-in-10 businesses said that they were actively concerned about the threat of legal action. This proportion was even higher amongst medium-sized and large businesses.

This reflects concerns raised by the Adam Smith Institute’s recent ‘Judge Dread’ paper, which highlighted the increase of class action cases in the UK, propelled by the expansion of third-party litigation funding.

At a time when the UK should be aiming to bolster business confidence, the rapid expansion of class action cases and third-party litigation funding is opening many businesses up to claims worth billions of pounds.

Set in motion by legal reforms introduced in 2015, this class action explosion has been supported by an expanding industry of third-party litigation funders (TPLF), who aim to profit from these potentially lucrative class action cases. The combination of class action expansion and the proliferation of TPLF creates a legal environment in which consumer protection cases benefit litigation funders and claimant law firms, rather than negatively affected consumers, undermining trust in the UK’s legal system for businesses and individuals alike.

In recent years, a number of high-profile class action cases have been heard in UK courts - with the biggest ever class-action case in British history reaching the High Court in 2024. In that case, the Court is considering a case against Australian mining firm BHP, which could face a bill of some £36 billion in relation to some 600,000 claimants. This is despite steps taken by BHP to settle with the Brazilian authorities, providing redress in the relevant jurisdiction. 

For businesses worldwide, this sends a clear signal – invest in the UK, and risk falling foul of our ever-expanding class action regime. For businesses looking to test new products or systems, this is a particular disincentive – once again moving the UK to the back of the queue on innovation. As the Adam Smith Institute’s recent work on this subject highlights, we are now at risk of losing business to other jurisdictions with less litigious legal systems.

Though not mentioned as a primary concern by most respondents, Brexit did receive some attention from respondents. Opinion on the effects of Britain’s EU exit was split, with some businesses lamenting restricted access to the European market, while others argued that Britain’s greater regulatory flexibility constituted a long-term positive. 

And finally, across the board, businesses expressed frustration with the Government’s broader approach to the economy, which is discordant with the real experience of business leaders operating in the economy. Fundamentally, this is underpinned by a risk-averse mindset.

“One of the key concerns with the UK business landscape is the stagnation in entrepreneurial spirit, particularly in early-stage investment and support for innovation. A risk-averse culture, and limited incentives for new ventures, has contributed to a slowdown in economic dynamism. This is especially evident in the tech sector, where other markets are advancing at a much faster pace, leaving the UK at risk of falling behind in global competitiveness. Addressing these challenges is crucial to fostering a more dynamic and supportive environment for innovation and growth.”

- Technology and Digital Services, Small Business, London

However, the picture was not uniformly bleak. One strong theme across the survey was that, in spite of poor policy, the UK has a number of attractive long-term fundamentals. Quality of human capital was one such strength, with a number of respondents lauding Britain’s innovative and well-educated workforce. Relative stability, global reputation, and quality of higher education were also celebrated as positives. 

“There is good access to skills in London and the South East, and the generally stable rule of law should make the UK an attractive place for mature organisations to do business.”

- Technology and Digital Services, Small Business, London

“We remain a leader in certain sectors such as finance, advanced manufacturing, creative industries etc.. We speak a useful language, we are in a good time zone and we benefit from the clear rule of law but there is nothing that the government is doing that promotes long term confidence.”

- Financial and Professional Services, Small Business, London

“Our biggest strengths are our reputation (quickly being destroyed I suspect), the English language and our time zone. We also have some fantastic entrepreneurs if only the incentives were there to actually take risks and grow businesses.”

- Retail, Medium-Sized Business, Scotland

In addressing the private sector’s broader concerns about the UK’s business landscape, the Government should recognise that the UK has an enormous opportunity. By making better policy decisions, we can allow Britain’s strong fundamentals to flourish - leading to increased growth, wages, and living standards.

Conclusion

The Adam Smith Institute’s 2025 Business Confidence Survey paints a clear picture - businesses are losing confidence in the UK, at a time when the country desperately needs growth, investment, and innovation.

If it wants to meet its growth targets, the Government must listen to these private sector frustrations - and address their concerns with substantive policy changes. Businesses are clear: to grow, they need lower taxes, simpler regulation, and an economic model which rewards risk.

This must start with reconsideration of plans to reform employer NICs and further regulate employment, giving businesses more freedom to manage their workforce needs. These proposals were roundly criticised by the businesses that we surveyed and, if implemented, could further compound concerns around the burden of taxation and regulation that UK businesses now face. The increase in NI and the Employment Rights Bill should be paused, with any future draft refitted to address private sector concerns.

This should be coupled with relief for the Hospitality and Retail sectors, through the implementation of the recommendations of our ‘On The Rocks’ research. The Government should work with businesses to reform existing planning and licensing rules, giving them greater operational flexibility through reform of planning and licensing laws would shore up their ability to generate turnover in the long-term. Greater flexibility would mean more options for businesses, and more opportunities to seize on consumer demand to generate profits. It also means freedom from fear of complaints - businesses are liable to self-censor on the assumption that their behaviour could provoke disgruntled neighbours to file a report with the local council. 

High taxes on property has limited stock velocity through the housing and property market. As previous ASI research has exposed, stamp duty land tax is 4x more damaging per pound than VAT. Imposing higher costs on workers and firms looking to move to higher productivity areas, the overall economy is held-back. A dynamic economy is a prosperous economy - blockers to this, namely the stamp duty land tax, should be abolished entirely - revenues may be made-up through accrual of macro-productivity gains.

In order to arrest the ‘human capital flight’ that the UK is now facing, the Government should consider an Italian-style annual flat fee of £150,000 for highly mobile wealthy individuals who are resident, but not domiciled, in the UK.  If all current non-doms were willing and able to afford this fee, this could raise £12.45 billion a year in tax revenue, while attracting more non-doms to our shores - and expanding the pool of available capital for businesses looking to grow, expand, and innovate.

Procurement problems have been highlighted in the survey - as the ASI has previously published on, social value remains a significant blocker on public-private partnerships. In our The Price of Everything, the Social Value of Nothing, we found that the current procurement framework’s emphasis on social value metrics excludes SME competitors in favour of larger incumbents. The government should scrap social value metrics in its procurement frameworks entirely, and instead concentrate on opening procurement up to more dynamic but less well-resourced companies who offer better value for taxpayers.

And as our ‘Judge Dread’ research highlighted, the rise of ‘lawfare’ is now having a material impact on UK business confidence. In order to create a fairer system for claimants and businesses alike, the Government should reform third-party litigation funding rules, subjecting it to the same rules and regulations as other investment products. This should be coupled with steps to introduce greater transparency into TPLF-backed class action cases, including the introduction of a blanket requirement of transparency about third-party funding, and efforts to put the ball back in business’ court when they fall foul of regulators, introducing arbitration clauses as a feature of regulatory decisions wherein businesses might be expected to provide compensation.