Experts Comment: Why Is Stability And Clarity In Government Policies So Important For Growth?

Many businesses across the UK are holding off on hiring and investment plans ahead of the upcoming Budget. The uncertainty about what tax measures will be announced has caused firms to delay decisions. According to Ben Jones, economist at the Confederation of British Industry, businesses want to understand the government’s next moves before making long-term plans.

This pause comes as the UK economy showed a small recovery in August, with a 0.2% increase in growth, largely driven by sectors like construction and retail. Even with this recent uptick, many companies remain cautious, preferring to wait for clarity on future policies. There is growing concern that new taxes or regulations could heavily impact their operations, which is leading to this hesitation.

Surveys from the CBI show that many businesses took a step back in September, further indicating that economic uncertainty is slowing down activity. The anticipation of changes in the government’s economic direction is adding pressure, especially with key industries looking for more stability.
 

What Tax Changes Are Being Discussed?

 
Apparently rumours see possible tax changes that could be introduced in the upcoming Budget. One of the things mostly discussed is a raise in capital gains tax, which could go as high as 39%. This tax affects the profits made from selling assets like second homes or shares, and many business owners are concerned about how this change might impact their plans.

Other tax adjustments that have been discussed include raising employer contributions to National Insurance and making changes to pension tax relief. Business leaders have expressed frustration, especially those in the manufacturing sector, where higher employer costs could be particularly tough. Adrian Hanrahan, who runs a chemical export company, voiced concerns that additional National Insurance costs for employers would make it harder for businesses like his to thrive.

With so much speculation, clearly many companies are anxious to see what the actual changes will be. The uncertainty is leading some firms to pull back, to avoid anything that might expose them to higher costs.
 

What Are Experts Saying?

 
Experts have shared their views on how uncertainty around government policies— such as unclear tax plans, regulations, or spending decisions— affects business behaviour. Specifically, how businesses often pause investments and hiring when they are unsure about future economic conditions or government policies, such as during the lead-up to a Budget.

Some experts also touch on the consequences of this behaviour, such as slower economic growth, lower job opportunities, and a decrease in business confidence:
 

Our Experts:

Eleanor Lightbody, CEO, Luminance

“With the UK boasting the highest number of unicorn companies in Europe and attracting over £860 million in VC investment from 2023 to 2024, there is a unique opportunity to solidify the country’s leadership in the global tech race. The International Investment Summit is an important moment to continue our policy planning and investment momentum, creating a collaborative environment that drives innovation.

“Agile AI regulation that fuels, rather than stifles, tech innovation is key. As we near a year since the inaugural AI Safety Summit, it’s crucial to tackle the next steps in solidifying the UK’s tech leadership. Investing in R&D tax credits and committing to Labour’s proposed 10-year funding cycles are steps which will elevate our position globally and solidify our position as an AI powerhouse.

“Moreover, we must engage in frank discussions about AI washing and the prevention of misinformation. Conversations around ending this practice are paramount to maintaining the integrity and trust in our technological advancements, positioning the UK as an ambitious tech leader on the world stage.”

Jane Barrett, Founding Partner, Cadence Innova

“We are observing much uncertainty in the lead-up to the Budget at the end of this month. We can see from our own pipeline of work there is c.£110m of decisions which have been delayed across all levels of government, and especially where we are working within public/private consortiums. It’s affecting decision making in all parts of society, with people adopting a “wait-and-see” approach.

“Postponing decision making has wide-reaching consequences on a macro level – economic growth stifled, reduction in job opportunities, and dampen business confidence.

“In my day to day world – it affects every management decision I make – how do we achieve our strategic objectives and business plan with the uncertainty – do we hire/not hire, do we invest in bidding for large pieces of work which could get shelved or go for smaller pieces of work with more certainty, and crucially, how do I invest my time and resources to grow the business without taking on too much risk.

“Hopefully, the budget at end of October will give us some direction – however many think it won’t and will lead to further confusion within the market.”
 

Sehaam Cyrene, Founder, Coach Lead

In uncertain times, if spending does not directly support economic reality — maintaining market share or survival — it won’t get signed off. Investments like training, promotions and new hires go on freeze. As employees, we have trouble accepting the change and like to think our leaders will shelter us.

Leaders too get stuck in denial and their response to uncertainty — their leadership — often lags behind. Feeling they don’t have any definite plans to share, they avoid conversations that their people are expecting. No-one wants to deliver bad news but the trouble is people fill in the silence with their fears.

Leaders lose control of the messaging amid rumours and distractions, which are a real risk to a company’s revenue, innovations and market share because people lose concentration, point blame, get frustrated with a lack of transparency, and then leave.

The only way to mitigate these risks is to get really close to your people and hold conversations where people’s fears are not discounted as “unhelpful”. Where people trust their leaders, they are more generous with their best ideas for how to stay focused, adapt and respond to uncertainty together.

If you don’t, you won’t see the risks until it’s too late.

Grant Thomas, Chief Commercial Officer, CreateFuture

“Whilst low growth isn’t just a UK challenge, there is no doubt that the UK Government has got its work cut out to encourage businesses to invest with confidence. Just today, the Prime Minister promised to scrap regulation that “needlessly holds back investment” in the UK as he opened a major business summit in London. This will certainly be welcome news for large swathes of the nation’s business community.

“High-performing tech businesses will grow despite the economic circumstances and an uncertain outlook. However, to truly turbocharge recovery and achieve sustainable growth, we need to build back both business and consumer confidence. This will require a taxation system that incentivises individuals and businesses to invest domestically.

“Tech companies such as CreateFuture play an important role in creating jobs and increasing productivity among workforces – for instance by enabling businesses to use Artificial Intelligence to solve some of their most pressing challenges. As we know, increasing UK productivity has been somewhat of a ‘Holy Grail’ quest for governments of all political persuasions over the years. However, the point remains that tech organisations of all sizes have a key role to play in getting the UK back to strong growth. All measures to make this easier will undoubtedly be welcomed.

“With that in mind, we would like to see further support for those small and medium-sized businesses that aspire to supply services to central government through the Crown Commercial Services procurement frameworks. This would certainly be a step in the right direction; not only could we get economic growth back on track, but also improve the lives of millions who rely on vital government services.”

Peter Wood, Chief Technical Officer, Spectrum Search

“When government policies are unclear, particularly on key issues like taxes or regulations, businesses often find themselves in a tricky spot. I’ve seen how this uncertainty can cause companies to put important plans on hold. Decisions about investing in new projects, hiring staff, or even launching new products often get delayed, leaving businesses stuck in a kind of limbo.

“It’s the uncertainty that causes hesitation. If a company doesn’t know what its future tax bill might look like or whether regulations will change, it becomes much harder to plan ahead. Questions like “What if taxes go up next year?” or “Will new rules change the way we operate?” hang over every decision. As a result, companies tend to freeze. They hold off on big investments, put a pause on hiring, and scale back on any expansion plans—all to avoid unnecessary risk.

“This kind of stop-start behaviour is particularly noticeable in sectors like tech. If, for example, the government suddenly looks like it might change its approach to regulating new technologies like AI or blockchain, companies often become more cautious. They won’t want to commit to launching a new product or pouring money into research and development until they have a better idea of what the rules will be. In the lead-up to major policy announcements, this uncertainty only grows.

“Businesses, by their nature, crave stability. Without it, the effects can ripple through the economy. When hiring slows down, fewer jobs are created, which means less money in people’s pockets and, ultimately, slower growth. A cautious approach from businesses can drag down the entire economy, stifling innovation and shrinking confidence. Even companies that are ready to take advantage of new opportunities might hold back if they fear a sudden change in tax or regulation could throw a wrench in their plans.

“It’s not just the immediate financial impact that’s concerning. When hiring is put on hold, companies risk losing top talent to competitors who are more willing to take a gamble. In times of uncertainty, it’s usually the bold ones who push forward, while the more cautious players wait on the sidelines. Most businesses can’t afford to take unnecessary risks when the future feels so up in the air.

“At the end of the day, without clear and consistent government policies, businesses are left second-guessing their next move. It’s not just about delaying decisions—it’s about potentially falling behind when it comes to innovation and growth.”

Phil Alves, Founder & CEO, DevSquad

1. Why is stability and clarity in government policies so important for growth?

In my experience, stability in government policies is like the bedrock for business confidence. When policies are clear and predictable, businesses can plan effectively, allocate resources wisely, and make strategic decisions without fearing sudden disruptions. For companies like DevSquad, which develops SaaS solutions, long-term investments are crucial. We need to know that the rules governing taxes, data privacy, and tech regulations won’t change overnight. This allows us to focus on what we do best—creating value for our clients—rather than constantly adjusting to a moving target.

2. How does uncertainty impact business behaviour?

Uncertainty is a productivity killer. When businesses can’t predict how future tax plans or regulations will unfold, many adopt a wait-and-see approach. They freeze hiring, delay launching new products, or postpone expanding into new markets. I’ve seen clients hold off on software development projects simply because they’re unsure about potential regulatory shifts. This isn’t just about caution—it’s about risk management. When the ground beneath your feet feels unstable, you don’t want to take a big leap, and that leads to a slowdown in innovation and growth.

3. What are the broader consequences of this behaviour?
The ripple effects are substantial. Slower decision-making means fewer new products, delayed job creation, and a general dip in economic activity. It’s a chain reaction—if companies are hesitant to invest, they’re also less likely to create new opportunities for suppliers, contractors, and talent. This, in turn, reduces the multiplicative effect of business growth on the broader economy. We end up with a situation where businesses play defense rather than offense, which stalls innovation and limits the dynamism of markets.

4. What’s the path forward?
In my opinion, for businesses to thrive, governments must prioritize transparency. Clear, long-term policy signals allow companies to make strategic decisions with confidence. For example, if tax changes are on the horizon, offering phased implementations can give businesses the time to adjust. The ultimate goal should be a partnership between the public and private sectors—where businesses are confident enough to take risks, and governments provide the stability needed to make those risks worth taking. When that happens, growth becomes a natural outcome.
 

Sara Brigden, Managing Director, ForrestBrown

 

 
“We’ve seen firsthand how uncertainty around government policies can impact business decision-making, with firms often pausing critical investment and opting for a ‘wait-and-see’ approach. This is especially true in the run-up to the Budget, with many businesses waiting for greater clarity on the UK’s tax environment and the direction of wider economic policies.

“Although the government is making a concerted effort to position the UK as an attractive destination for foreign direct investment, UK businesses still need the reassurance of a stable tax and policy regime for long-term planning. Our research found that almost a quarter (24%) of business leaders believe political and economic uncertainty is the most significant barrier to innovation investment. Without a predictable roadmap, many businesses lack the confidence to invest in transformative projects.

“This is especially critical for innovative firms, as R&D is inherently risky, making stability in the tax and policy environment even more important. A clear, consistent framework allows businesses to plan long-term investments with confidence, which is essential for unlocking private-sector innovation and driving economic growth.”