Business optimism and caution under the new Labour Government

With the Labour Government newly established in Westminster, UK businesses are closely watching for impacts on their operations and growth. Recent data from Savanta’s UK Business Tracker reveals a mix of optimism and cautious concern among business leaders, as Labour sets its agenda for the next five years.

Amy Sams Consultant 08/08/2024

Widespread optimism among medium to large enterprises

Half (51%) of UK businesses say they are optimistic about the Labour Government’s impact on the national economy, with 20% expressing strong optimism. This extends to their own prospects, with 47% anticipating positive impacts.

Medium to large enterprises (250+ employees) emerge as the most optimistic, with 60% confident in Labour’s positive impact on their business and 65% on the UK economy. In contrast, smaller businesses (<250 employees) display less certainty, with optimism figures at 43% for their businesses and 46% for the broader economy. This divergence in optimism may be explained by the challenging economic environment of recent years, with smaller businesses struggling to mitigate against economic fluctuations as effectively as their larger business counterparts.

Why do many businesses feel this level of optimism? It is likely to do with a significant proportion believing that the new Labour government is going to create a favourable environment for them. This view is shared by over half of UK businesses (54%), with positive sentiment notably stronger among medium to large enterprises once more (69%).

However, differences remain among businesses of varying sizes, as a sizeable proportion of small enterprises remain skeptical, with only 49% viewing Labour’s victory as beneficial for the business climate.

Manifesto promises under scrutiny – concerns among business leaders

Despite the general optimism, UK businesses, especially medium to large enterprises, exhibit strong concerns regarding Labour’s policy programme.

A significant 70% of businesses express apprehension about the economy under Labour, with 40% of medium to large businesses feeling ‘very concerned’. Taxation policies also raise alarms, with 76% of these larger businesses reporting concern.

Concerns about economic management and taxation indicate a significant risk factor that could dampen business confidence if not addressed. This apprehension could lead to cautious investment and operational strategies among businesses. If Labour does not manage these concerns effectively, the initial optimism could wane, impacting overall business growth and economic stability.

Future expectations – Labour’s initial steps and business priorities

UK businesses have clear expectations of the government in its first 100 days.

Strengthening the NHS to address absenteeism is the top priority for businesses, although opinions diverge on subsequent actions.

Financial incentives for emerging businesses garner support from 35% of respondents, reflecting a desire for a more supportive business environment, while 32% advocate for the simplification of regulations. Interestingly, aiding in digital transformation (20%) and relaxing planning regulations (12%) are deemed less critical.

There is a clear divergence in sentiment across different business sizes. Smaller businesses are significantly more likely to prioritise financial incentives, likely due to their need for support in initial growth stages. These incentives would provide crucial assistance for smaller organisations, helping them to establish and expand their market presence. Conversely, larger organisations, which are looking beyond initial setup and more towards their long-term strategies, prefer Labour to focus on digital transformation (30%) and the promotion of sustainable business practices (29%).

To maintain and build on the current optimism, Labour must address key business concerns, particularly around economic management and taxation, while prioritising actions that support business growth. The differing priorities by business size underscores the need for Labour to adopt a balanced approach. Providing initial support to smaller businesses and adopting forward-looking strategies for larger enterprises will help ensure comprehensive economic growth.

Savanta will be continuing to track how the Labour Government fares against business leader’s expectations. To keep up to date on the latest developments in the political and business space, please contact our dedicated team of B2B experts.