Has Britain become a worse place to do business?

The importance of business confidence can be understood by a simple causal chain: confidence drives investment, investment drives productivity, productivity drives growth. It is a simple chain, but one Westminster still seems to underestimate.

This lack of business confidence is demonstrated in findings from new research commissioned by Sanctuary. In a survey conducted by GB Insights, business leaders across the UK were asked whether they felt the country had become a better or worse place to do business since the 2024 General Election. The answer was sobering: a majority said the UK has become worse.

For a Labour government that entered office promising to make growth its defining mission, this should be deeply uncomfortable reading. The results suggest that Labour has failed to rebuild the trust of British business, leaving them overburdened and unconvinced that Westminster has a credible plan for growth. This is not a marginal complaint from a handful of unhappy businesses, it is a warning from the people whose decisions and actions directly drive growth in practice.

Moreover, their outlook for the next two years does little to soften the blow. 42% of respondents expect the UK to become a worse place to do business, while a further 20% expect only negligible change and just 35% expect improvement. Reading between the lines, even a change in leadership and a renewed emphasis on growth may not be enough to shift the mood quickly. Business sentiment has already hardened, and once firms start making decisions on that basis, rebuilding confidence becomes far harder.

That matters because confidence is not just a mood; it translates directly into decisions about jobs, investment and expansion. Hiring is one of the clearest tests of whether firms believe the conditions are right to grow, and here too the findings point to caution. Only 41% of respondents expect their UK headcount to increase over the next two years, while 57% expect employee numbers to stay the same or decrease.

Small businesses, which account for the overwhelming majority of UK firms and play a vital role in employment, innovation and local economies, appear particularly pessimistic. Firms with fewer than 50 employees are among the most likely to say the UK has become worse as a place to do business and to expect further deterioration over the next two years. This matters because small firms are critical when it comes to employment, growth and economic resilience.

There is, however, one striking exception in the findings. The technology sector stands out as more optimistic with 62% of respondents saying the UK has improved as a place to do business since the election, 67% expecting improvement over the next two years, and 61% expecting to employ more people in the UK. The findings suggest that optimism exists in parts of the economy, but is highly uneven. It raises important questions about why some sectors feel well positioned for growth while others remain unconvinced that the current policy environment will support investment.

The survey also points to a wider political credibility problem. When respondents were asked which potential Prime Ministers would improve or worsen the UK as a place to do business, no figure commanded overwhelming confidence. For policymakers, that should be a reminder that business confidence cannot be assumed. It must be earned through clear, consistent and credible policies that give firms the confidence to invest for the long term.

That makes the coming change in Labour leadership more than an internal party reshuffle. Now that Andy Burnham is in No.10 he will inherit a business community that is sceptical, cautious and unconvinced. Being the least disliked potential leader by businesses in this research gives him an opening, but it is hardly a ringing endorsement.

Businesses, including Sanctuary, will be watching for action, not just another growth slogan.