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Labour is facing a drop off in confidence among business leaders amid plans for tax rises and improvements to workers’ rights, according to a survey.

The Institute of Directors (IoD) had noted a leap in optimism in July among its membership as the new government came to power.

But its latest economic confidence index showed a slump from a three-year high, falling into negative territory in August.

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Major indicators to show the biggest declines included business investment and employment.

Others to fall back were expectations for revenue, exports and wages.

Recent data has shown the UK economy to have the fastest economic growth in the G7 over the first half of the year.

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Prime minister Sir Keir Starmer and his chancellor Rachel Reeves have made securing growth the “top priority” but complain their plans are being complicated by a legacy £22bn black hole in the public finances.

“Tough choices” they have already announced, ahead of the 30 October budget, have included cutting winter fuel payments for all pensioners.

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Chancellor quizzed over tax rises

Critics argue the tough choices include caving in to union demands to avert strikes, racking up a £9bn bill across public sector pay awards.

Commentators widely expect hikes to wealth taxes, such as capital gains tax, in the budget as it would chime with Sir Keir’s warning last month that those with the broadest shoulders would face the greatest burden.

An Employment Rights Bill is also due to prohibit zero-hour contracts and ban so-called fire and rehire tactics.

One particular sector to raise fears of an own goal was energy.

Industry body Offshore Energies UK claimed government plans to increase a windfall tax on North Sea oil and gas producers would lead to a £12bn fall in revenue to the state, due to weaker production and investment.

The IoD survey findings represent a major turnaround in opinion.

Ms Reeves secured a strong relationship with business in the run up to the election as firms ran out of patience with the Conservatives, long complaining of a lack of communication and strategy.

IoD chief economist Anna Leach said of its findings: “It’s disappointing to see last month’s welcome uptick in business leader confidence snuffed out over the summer.

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Reeves’ black hole claim ‘not credible’

“It is notable that the sharpest drops in our economic measures are in investment and headcount expectations, whilst other measures have moved to a lesser degree, albeit in a likewise negative direction.

“The newsflow in recent weeks on employment rights and autumn tax rises has dented confidence in the environment for business in the UK.

“As we head into a busy autumn, we are calling on the government to take time to get policy design right for the long-term and deliver the stable tax and policy framework needed to drive business confidence and investment.

“Further clarity on the industrial strategy and the business tax roadmap, in conjunction with more progress in engaging with business on workers’ rights, would be welcome.”

The findings chime with warnings that the budget should not seek to rake in cash at the expense of the economy.

Former president of the CBI, the Cobra beer founder Lord Bilimoria, said fears of tax increases would spark an exodus.

Read more:
Economy could have crashed without winter fuel action, minister claims
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He called on the government to concentrate on growth, calling any rise in capital gains tax “a short-sighted move”.

“Investors are not going to come here if you keep putting up taxes,” he told the Daily Mail.

“It will not bring in more money; in fact, money will fly from this country.”

His comments were echoed by lastminute.com co-founder Brent Hoberman, who told the newspaper it “does not make sense to scare off business investment”.

Watch Business Live with Ian King at 11.30am and 4.30pm on Sky News.

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Vietnam legalizes crypto under new digital technology law

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Vietnam legalizes crypto under new digital technology law

Vietnam legalizes crypto under new digital technology law

Vietnam has passed a sweeping digital technology law that legalizes crypto assets and outlines incentives for AI, semiconductors, and infrastructure.

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Brazil ends crypto tax exemption, imposes 17.5% flat rate on gains

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Brazil ends crypto tax exemption, imposes 17.5% flat rate on gains

Brazil ends crypto tax exemption, imposes 17.5% flat rate on gains

Brazil scraps crypto tax exemption for small traders, enforces flat 17.5% rate across all gains, including self-custody and offshore holdings.

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A scrambled G7 agenda as world leaders scramble to de-escalate the Israel-Iran conflict

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A scrambled G7 agenda as world leaders scramble to de-escalate the Israel-Iran conflict

The return on Donald Trump to the G7 was always going to be unpredictable. That it is happening against the backdrop of an escalating conflict in the Middle East makes it even more so.

Expectations had already been low, with the Canadian hosts cautioning against the normal joint communique at the end of the summit, mindful that this group of leaders would struggle to find consensus.

Canadian Prime Minister Mark Carney carefully laid down an agenda that was uncontroversial in a bid to avoid any blow-ups between President Trump and allies, who of late have been divided like never before – be it over tariffs and trade, Russia and Ukraine, or, more recently Israel’s conduct in Gaza.

But discussions around critical minerals and global supply chains will undoubtedly drop down the agenda as leaders convene at a precarious moment. Keir Starmer, on his way over to Canada for a bi-lateral meeting in Ottawa with PM Carney before travelling onto the G7 summit in Kananaskis, underscored the gravity of the situation as he again spoke of de-escalation, while also confirmed that the UK was deploying more British fighter jets to the region amid threats from Tehran that it will attack UK bases if London helps defend Israel against airstrikes.

Canadian Prime Minister Mark Carney is greeted by President Donald Trump as he arrives at the West Wing of the White House, Tuesday, May 6, 2025, in Washington. (AP Photo/Mark Schiefelbein)
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Canadian PM Mark Carney is greeted by President Donald Trump at the White House in May. Pic: AP

Really this is a G7 agenda scrambled as world leaders scramble to de-escalate the worst fighting between Tel Aviv and Tehran in decades. President Trump has for months been urging Israel not to strike Iran as he worked towards a diplomatic deal to halt uranium enrichment. Further talks had been due on Sunday – but are now not expected to go ahead.

All eyes will be on Trump in the coming days, to see if the US – Israel’s closest ally – will call on Israel to rein in its assault. The US has so far not participated in any joint attacks with Tel Aviv, but is moving warships and other military assets to the Middle East.

Sir Keir, who has managed to strike the first trade deal with Trump, will want to leverage his “good relationship” with the US leader at the G7 to press for de-escalation in the Middle East, while he also hopes to use the summit to further discuss the further the interests of Ukraine with Trump and raise again the prospects of Russian sanctions.

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“We’ve got President Zelenskyy coming so that provides a good opportunity for us to discuss again as a group,” the PM told me on the flight over to Canada. “My long-standing view is, we need to get Russia to the table for an unconditional ceasefire. That’s not been really straightforward. But we do need to be clear about what we need to get to the table and that if that doesn’t happen, sanctions will undoubtedly be part of the discussion at the G7.”

Prime Minister Sir Keir Starmer (right) is greeted by Prime Minister of Canada Mark Carney as he arrives at Rideau Cottage in Ottawa
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Prime Minister Sir Keir Starmer (R) is greeted by Mark Carney as he arrives in Ottawa ahead of the G7

But that the leaders are not planning for a joint communique – a document outlining what the leaders have agreed – tells you a lot. When they last gathered with Trump in Canada for the G7 back in 2018, the US president rather spectacularly fell out with Justin Trudeau when the former Canadian president threatened to retaliate against US tariffs and refused to sign the G7 agreement.

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Since then, Trump has spoken of his desire to turn Canada into the 51st state of the US, a suggestion that helped catapult the Liberal Party beyond their Conservative rivals and back into power in the recent Canadian elections, as Mark Carney stood on a ticket of confronting Trump’s aggression.

With so much disagreement between the US and allies, it is hard to see where progress might be made over the next couple of days. But what these leaders will agree on is the need to take down the temperature in the Middle East and for all the unpredictability around these relationships, what is certain is a sense of urgency around Iran and Israel that could find these increasingly disparate allies on common ground.

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