Director Weekly  What did we learn from the Chancellor’s unexpected pre-Budget speech?

The backdrop, of course, is a dismal mood among businesses. The IoD Directors’ Economic Confidence Index sat at -73 in October, little changed from -74 in September – the lowest reading on record.

The sense of gloom was reflected in the Chancellor’s speech, even as she hailed the UK’s “considerable economic strengths.” Since the last Budget, she argued, “the world has thrown even more challenges our way” – including tariffs, stubborn inflation, and the rising cost of government borrowing.

With actual policy decisions being kept under wraps until the Budget (26 November), the Chancellor’s aim was, she said, to set out “the circumstances we are facing” and “the principles guiding my choices.” In the absence of concrete announcements, businesses are left reading between the lines to infer what lies ahead.

The first – and most important – implication is that the Chancellor has opened the door to increasing a broad-based tax, such as income tax. “If we are to build the future of Britain together,” she said, “we will all have to contribute.” This is a much better path to getting the economy growing than hammering businesses again, as we argued in the IoD’s Budget Submission.

However, this does not mean employers are in the clear: Reeves declined to rule out further increases on businesses and investors. That’s in line with her refusal to give any firm indications about Budget decisions, but may leave some directors feeling nervy.

Next, Reeves signalled her intention to deliver “more resilient public finances – with the headroom to withstand global turbulence.” We warned that the tight headroom delivered by last year’s Budget carried significant risks so this would be a sensible, if belated, move – and should provide greater policy stability in the medium term.

The Chancellor also pledged to protect public services from “a return to austerity,” while signalling a renewed push for greater efficiency and productivity. Business would welcome progress in controlling costs and rooting out waste.

Markets reacted largely positively to the speech, with yields falling slightly, suggesting that investors approve of the Chancellor’s reiteration of her “ironclad” commitment to her fiscal rules. Yet businesses will hope for more ambition in terms of a road map for tax simplification and reducing the regulatory burden.

Indeed, that’s an area where opposition leaders are now training their sights. In another significant speech this week, Kemi Badenoch announced that the Conservatives would scrap the Employment Rights Bill – a move that many directors might support, given the government’s continued unwillingness to address employers’ concerns.

And in another keynote speech, Nigel Farage this week took aim at regulators – including the FCA – pledging that a Reform UK government would be “the most pro-business, pro-entrepreneurship government… seen in this country in modern times”.

The Budget will be with us in three weeks. This week has shed some light, at least, on what lie ahead.

Read the IoD’s full Budget submission to HM Treasury here.

Listen to the latest Director Podcast, ‘The Autumn Budget 2025: tax choices & challenges’, with Dan Neidle and Anna Leach here.