Suban Soraia Abdulla

British companies face a challenging 2025, the British Chambers of Commerce said on Wednesday with an increase in employment costs and potential tariffs on exports likely to hit their investment and trading prospects.

British public-sector employers now expect to raise pay faster than their private-sector counterparts for the first time since late 2020, after the new Labour government approved big public-sector pay rises funded in part by higher employer taxes.

Britain's services sector lost momentum in the run-up to the new government's first budget in October, with business activity growing at the weakest rate in 11 months and the first fall in employment since December, a survey showed on Tuesday.

Optimism among British firms has sunk, according to two surveys published on Thursday, six days before finance minister Rachel Reeves tries to chart a way between raising taxes and boosting growth in the new government's first budget.

British retail sales unexpectedly rose in September, according to official data published on Friday that contradicted signs that consumers were downbeat about possible tax rises ahead of the new government's first budget later this month.

Britain's new Labour government may need to increase taxes by 20 billion pounds ($26 billion) in its first budget on Oct. 30 to avoid real-terms cuts across public services, the Resolution Foundation said on Saturday.

British business confidence fell in the third quarter as tax worries hit investment, according to a survey of accountants that chimes with similar concerns from other business groups before the new Labour government's first budget.

British shoppers increased their spending moderately in annual terms last month despite industry concerns about tax rises in finance minister Rachel Reeves' upcoming budget and a looming rise in household energy bills, a survey showed on Tuesday.

Britain's economy grew more slowly than previously thought in the second quarter, but there were positive signs from household finances and business investment that could encourage finance minister Rachel Reeves as she prepares next month's budget.

British inflation held steady in August but sped up in the services sector which is closely watched by the Bank of England, data showed on Wednesday, adding to bets that the central bank will keep interest rates on hold on Thursday.