Large British businesses are preparing to slow hiring and reduce investments at the fastest pace since the COVID-19 pandemic, according to a report released by Deloitte on Monday. The survey points to the impact of substantial tax increases introduced in the government’s October budget, which include a £25 billion ($31 billion) rise in employers’ social security contributions.

Deloitte’s quarterly survey, conducted with 63 of the UK’s largest companies, reflects broader trends also seen in smaller and medium-sized businesses grappling with the tax hike. As cost control becomes a priority, the survey indicates that chief financial officers (CFOs) are scaling back their expectations for corporate investment, discretionary spending, and hiring over the next 12 months.

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Ian Stewart, Deloitte’s chief economist, noted, “With cost control to the fore in the wake of the budget, CFOs have trimmed expectations for corporate investment, discretionary spending, and hiring in the next 12 months.”

The survey, conducted from December 3 to December 16, did not account for the recent drop in sterling and the spike in 30-year government bond yields, which have reached their highest levels since 1998. These developments have raised concerns about an economic slowdown since the government’s budget announcement.

Employment intentions among businesses have seen the steepest decline since early 2020, and plans for capital expenditure are at their weakest since Q3 2023. Companies are also showing less appetite for taking on risk, with CFOs showing the least confidence in the economy in more than a year.

Despite this, business optimism has dipped to a two-year low, although the overall sentiment is not as negative as the lows witnessed in 2022 or 2020, according to Deloitte’s findings. While CFOs still consider the UK a more attractive investment destination than the eurozone, the gap has narrowed, with Europe trailing behind the United States as the preferred choice for investment.

In a separate survey, manufacturing trade body Make UK revealed that 57% of manufacturers would consider increasing investment once the government provides further details on its long-term industrial strategy, expected in the first half of 2025.

Stephen Phipson, Chief Executive of Make UK, emphasized the urgency of the government presenting clear and immediate priorities as part of the industrial strategy. He believes it could help boost business confidence and set a positive tone for the year ahead.