Can Construction Hold the Line as Business Confidence Wavers?

UK business confidence has taken a notable hit over recent months. The latest ICAEW Business Confidence Monitor revealed a sharp decline in sentiment heading into Q4 2025, and the national index fell to -7.3, its lowest level since late 2022, reflecting widespread caution across sectors.

According to the Institute of Directors, confidence among business leaders is at a record low, with their index plunging to -74, the weakest reading since its inception in 2016.

This downturn is unfolding against a backdrop of growing nervousness about the upcoming Autumn Budget 2025, due on 26 November.

Many businesses still remain unsettled by the Chancellor’s 2024 Budget, which introduced £40 billion in tax rises, including increases to employer National Insurance contributions and capital gains tax. And, whilst the government pledged not to raise income tax, VAT, or National Insurance again, speculation persists that other fiscal levers – such as threshold freezes, pension relief reforms, or inheritance tax adjustments – may be used to plug a projected £40–50 billion shortfall.

A resilient but under pressure sector

Amid the broader decline, the construction sector does stand out for its relative resilience. In fact, in Q3 2025, despite the sector’s confidence dropping from +4.7 to +1.8, below the sector norm of +3.8, it remained positive and is in stark contrast to the UK average of -7.3. This positions construction as one of the more optimistic sectors, second only to Energy, Water & Mining.

Strong domestic sales expectations and ongoing demand in housing and infrastructure projects have helped sustain such sentiment. However, the sector is not immune to mounting pressures:

• Tax burden is a major concern, with 73% of construction firms citing it as a growing issue – the highest proportion across all sectors.
• Regulatory pressures have reached a new survey high, adding complexity to project delivery and compliance.
• Skills shortages remain acute, particularly in management and technical roles, threatening productivity and growth.
• Customer demand is showing signs of softening, especially in commercial construction, as clients delay decisions amid fiscal uncertainty.
• Capital investment plans remain above average, but R&D budgets continue to stagnate, raising concerns about long-term innovation and competitiveness.
• Input price inflation has eased, offering some relief, but labour cost pressures persist, and firms remain exposed to global supply chain volatility and delayed public sector decisions.

Budget uncertainty dampens investment

Across the economy, businesses are scaling back investment plans and delaying hiring decisions. With many adopting a “wait and see” approach ahead of the Autumn Budget, wary of potential changes to tax policy and regulation.

This lack of clarity is already affecting confidence, particularly in sectors reliant on long-term planning and capital expenditure.

As ICAEW CEO Alan Vallance warns, “If the government is to come good on its growth mission, it must demonstrate that it is firmly on the side of business.”

Making the Autumn Budget a critical moment – not just for fiscal policy, but for restoring confidence across the business landscape.

We’re here to help

If you’re operating within the construction sector, you may be looking to review your strategic plans in line with the Budget.

Whether you’re considering capital investment, navigating tax changes, or addressing workforce challenges, we can help you to assess the risks and identify any opportunities. Helping your business to stay resilient and responsive in the face of policy shifts.

Get in touch with one of the team today by calling 0330 058 6559 or email hello@scruttonbland.co.uk to arrange a review that’s tailored to your needs.

You can read the full ICAEW Business Confidence Monitor for Construction Report here