UK business confidence fell to a new low in September, according to the Institute of Directors. The IoD’s monthly economic confidence index registered minus 74, the weakest reading since the index began more than nine years ago. It followed minus 61 in August, and the previous record low was minus 72, recorded in July this year amid worries over trade tensions.

Firms cited higher labour costs as the main driver of pessimism. Cost expectations rose to plus 89 as inflation picked up. About 83% of those polled linked the worsening outlook to higher labour costs, with supply chain inflation and energy costs also singled out.

Labour costs rose from April after the Government increased the national minimum wage and National Insurance Contributions for employers. Anna Leach, chief economist at the IoD, said: “Business confidence has plumbed new depths in September, following a fleeting improvement at the tag-end of summer. Conditions worsened across the board, with cost expectations hitting a record high, driven notably by employment costs. Investment expectations declined again, although remained somewhat above the most recent low in November 2024. Meanwhile headcount expectations continue to seesaw as the effects of the April rises in employment taxes and the living wage, alongside future concerns over employment regulations, continue to reverberate across companies.” Shadow chancellor Sir Mel Stride said: “Business confidence has been shattered, not by global uncertainty, but by deliberate choices made by the Labour government.”