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Snapshot of UK Business Conditions: December 2024

As 2024 comes to a close, UK businesses are navigating a landscape marked by cautious optimism and persistent challenges. A recent dialogue hosted by the French Chamber of Commerce in Great Britain with the Bank of England and the Service Économique Régional at the French Embassy offered insights into the economic climate and reactions to the Labour government’s first budget.

Key Insights from the Discussion

• Economic Challenges and Uncertainty

Global trade continues to face uncertainty, with potential tariffs and geopolitical tensions—such as U.S. policy shifts and regional conflicts—dampening business confidence. Investment decisions are being delayed or scaled back, particularly in export-driven sectors like food and drink, which report significant cost pressures from raw materials and customs processes.

• The Autumn Budget: Mixed Reactions

The Labour government’s first budget introduces ambitious spending on healthcare, education, infrastructure, and clean energy—signalling a strong vision for growth. However, businesses raised concerns about:

- Increased Taxation: Changes to National Insurance Contributions (NICs) and the non-dom regime may impact workforce mobility and investment decisions.

- Rising Costs: Across sectors, companies are preparing for price increases, which could dampen consumer spending, particularly in retail and hospitality.

-  Infrastructure: Progress with Challenges

Businesses broadly welcomed the budget’s focus on infrastructure, including promises to unlock land for development and accelerate planning. However, workforce shortages and planning bottlenecks could delay projects in housing and transportation.

Opportunities for Growth and Innovation

• Clean Energy Transition

The budget’s commitment to clean energy presents long-term opportunities, but high borrowing costs and policy uncertainties remain barriers. Businesses identified the need for:

- Targeted Investments: Supporting energy R&D.

- Bilateral Energy Cooperation: Cross-border energy projects, hydrogen innovation, and alignment with EU energy markets, as advocated by the Chamber.

- Innovation as a Bright Spot: Amid these challenges, businesses increasingly see AI and advanced technologies as tools to boost productivity and offset rising costs. By leveraging AI, companies can address efficiency challenges and lay the groundwork for future resilience.

•  Labour Market and Skills:

Recruitment challenges remain top of mind, with businesses calling for: 

- A more efficient visa system.

-  UK-France talent mobility schemes.

- Policies to attract international professionals.

These measures are essential to addressing labour shortages and maintaining the UK’s competitiveness as a global hub for innovation and enterprise.

• Reasons for Optimism

Despite the current headwinds, there is cause for optimism:

- Economic Recovery: Businesses anticipate modest GDP growth and inflation stabilization at around 2-2.5% in 2025.

- Continued Attractiveness: The UK retains unique advantages—its geographic position, language, and liberal economic culture—making it a magnet for global investment.

- Stable Government: The arrival of a stable administration with a clear economic direction has been widely welcomed, offering businesses the predictability needed to plan and adapt.