Resilience tested as confidence falls in the East
This highlights breakthrough technologies and world‑class entrepreneurial talent drawn from across Cambridge’s DeepTech, HealthTech, and research‑led ecosystem.
At the same time, the Government’s ongoing focus on Cambridge’s long‑term growth reinforces confidence in the area’s strategic importance to the UK economy. The backdrop for the city and region remains broadly optimistic, but there are challenges highlighted in the most recent ICAEW Business Confidence Monitor (BCM), one of the UK’s most comprehensive quarterly assessments of business sentiment.
National trends: confidence under pressure
The BCM survey suggests that businesses across the UK ended 2025 on a subdued note, with confidence slipping further into negative territory. Confidence for Q4 fell to –11.1, marking its lowest point since 2022 and extending a run of six consecutive quarterly declines.
Business confidence has been eroded by rising operational pressures. Concerns around the tax burden reached a record high in Q4, with almost two thirds of companies identifying it as a growing challenge. Businesses also continued to report elevated regulatory pressures, while both domestic and export sales remained weaker than historical averages.
Employment growth eased further, signalling a cooling labour market, and investment intentions remained subdued as firms paused or scaled back spending plans. Despite this, there is cautious optimism: expectations for domestic and export sales over the next 12 months are more positive, suggesting that businesses hope for an improvement once economic uncertainty begins to settle.
East of England: a sharper decline
The latest results show sentiment in the East of England deteriorating more quickly than in most parts of the country. The regional index fell to –18.5, down from –3.9 in Q3, and below the region’s historical average of +3.9. This marks the lowest regional reading in three years and reflects a combination of rising challenges that have intensified across 2025.
Sales performance provides an important part of the picture. Although domestic and export sales grew marginally over the past year, both measures remain below historic norms, and expectations for the year ahead are weaker than the national outlook. Businesses report increasing concerns around competition, late payments, and the difficulty of expanding into new markets, factors that contributed to a more pessimistic view on activity in 2026.
Cost pressures also continue to weigh on sentiment. While profits growth ticked up slightly, it still sits below historical averages, and wage pressures are expected to rise next year as labour shortages persist in some sectors. The region recorded the weakest capital investment growth of any UK region, and R&D spending is also expected to underperform in the coming year.
Sector considerations
The decline in confidence is not uniform across sectors, though certain industries have experienced more acute pressure. Business services and property related sectors have been hit hardest, with weaker sales growth contributing to the region’s overall decline. Nationally, retail, wholesale and construction also continue to report some of the lowest confidence readings, reinforcing the broader picture of slowing demand and tighter operating conditions.
Final thoughts
While the latest BCM results reflect a tougher sentiment across the East of England, what we are seeing on the ground in Cambridge is a far more balanced picture. Confidence may be subdued, but the region’s innovation engine remains exceptionally strong, and companies have shown resilience throughout 2025.
The strength of Cambridge’s innovation ecosystem is clear, with new talent and technical ambition continually emerging from across the region. These are the kinds of start ups and scale ups that will shape the next decade, and it’s encouraging to see such momentum at a time when national indicators suggest caution. Our ongoing support for the community, including our involvement in flagship events like Cambridge Tech Week, reflects our commitment to helping these businesses thrive.
So, while businesses are rightly navigating headwinds, many still expect improvements in profitability and sales over the next 12 months. Cambridge continues to outperform in areas that matter for long‑term economic health: innovation, skills, research intensity, and entrepreneurial activity. As advisers to many of the region’s most ambitious companies, we see first‑hand that the fundamentals here are strong, and that 2026 still holds significant opportunity for those positioned to take it.
• Edward Napper is a Partner in PEM’s Audit & Assurance team, advising owner-managed businesses across several business sectors with a particular focus on commercial, property and construction clients in Cambridge and across the wider region – you can contact him via enapper@pem.co.uk.
For more than 150 years, PEM has supported businesses and individuals across the region as they navigate shifting economic conditions. If you would like to discuss in more detail what these issues mean for you or your business, please get in touch.
