Businesses are feeling the heat in all sectors - Beckie Hart

So it will have come as a relief to many that the Chancellor has provided welcome support for households, particularly those for whom the need is greatest. No doubt spending plans across the country are being recalculated to ensure budgets stretch as far as they need to for families and firms to keep their heads above water while times are tough.

The big risk from all of this is that spending dries up. That families cut back on shopping and leisure pursuits, that companies put investment plans on hold.

If that happens, the inevitable consequence is that wider economic growth stalls, which risks throttling the UK’s future ambitions. This would not only delay the economy’s recovery from Covid, but also dent progress on net zero ambitions and regional prosperity too.

CBI data shows the risk is becoming very real. Our most recent survey of businesses operating in consumer services – a wide sector, which includes businesses like events, restaurants, travel and media – shows a significant fall in optimism for the months ahead.

Like the rest of us, firms are seeing their costs rise significantly, and know full well how the current situation is impacting their customers. The result is investment intentions for the year ahead are softening. Businesses which had planned to invest in new premises, technology and machinery are now thinking twice about doing so.

Professional services firms – this includes lawyers, engineers, accountants and architects, among others – have seen a similar fall in their optimism for the months ahead. In fact, confidence among these firms fell more rapidly in the past quarter than since late 2020, when Covid was spiking alarmingly and strict lockdowns were enforced.

And it’s the same picture for retail firms. They too are expecting a fall in sales to below typical seasonal levels in the coming months, and as a result their optimism has fallen more sharply than at any time since the pandemic. Their investment intentions have fallen equally rapidly.

Our region’s firms in these sectors are already feeling the squeeze on household incomes, while juggling rising cost pressures of their own. So action is needed to shore up their confidence and reignite their investment ambitions.

That’s why the CBI believes the Chancellor should follow up the support offered to vulnerable households with measures designed to rebuild business confidence. The Government must show it is willing to work with business on a genuine plan to stimulate investment and kickstart growth once again.

That should include near-term cashflow support for under-pressure firms to ease the impact of current price and supply chain crises. Extending the successful Recovery Loan Scheme would be a good move. Encouraging businesses to get investing is the game-changer for growth and future prosperity, though. Private sector investment will be a key driver of levelling-up and net zero ambitions, and critical for building the economic resilience needed to help the UK withstand future shocks.

Establishing a permanent successor to the Super Deduction to reward businesses that invest can have a tangible impact on spending intentions. Setting out an infrastructure roadmap and publishing a digital strategy would help too.

Together, these measures have the power to bolster business sentiment by signposting a route beyond today’s pressures to a secure and prosperous tomorrow – and they should be implemented without delay.