(Reuters) – British business confidence slid to a two-year low at the end of last year, pushed down by worries about tax following the Labour government’s first budget, a survey showed on Wednesday.

The Institute of Chartered Accountants in England and Wales (ICAEW) said its gauge of business morale fell to 0.2 in the fourth quarter, down from 14.4 in the third quarter.

It was the lowest reading since the fourth quarter of 2022 when Britain was hit by the mini-budget crisis of former Prime Minister Liz Truss.

Other surveys have also shown a fall in optimism in Britain’s boardrooms since finance minister Rachel Reeves’ budget announcement on Oct. 30 which imposed large increases in employer payroll taxes.

The ICAEW said there were “record concerns” over the tax burden faced by companies and firms reported a slowdown in domestic demand.

“Our data suggests that the UK economy endured a rather traumatic end to 2024 as slowing domestic activity and the aftershocks from a difficult budget caused business confidence to nosedive,” said Suren Thiru, economics director at ICAEW.

Reeves says growth is her top priority and that her budget will allow for more spending on public services and the investment needed to improve Britain’s economic performance in the long run.

But signs of a near stagnation in output since the budget have contributed to a jump in government borrowing costs and a fall in the value of the pound.

A key question for the Bank of England is how businesses react to the tax increases in the budget – which are due to take effect in April – as it gauges inflation pressures.

The ICAEW said its measure of selling prices fell to its lowest level since early 2022 and was expected to slow further in the months ahead, while input cost inflation was the lowest in three years. But firms expected stronger input cost growth ahead due to the impact of the budget and global uncertainty.

The survey of 1,000 chartered accountants took place between Oct. 14 and Dec. 13.

(Reporting by Andy Bruce; Editing by William Schomberg)