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A survey of North East business leaders has highlighted a drop in confidence after October’s Budget sparked rising costs for many firms.

The Entrepreneurs’ Forum, a North East group that aims to help growing businesses, polled 100 company leaders, and found 57% said they are more pessimistic for their own business following the Budget while only 13% said they were more optimistic.

Chancellor Rachel Reeves introduced a rise in employer National Insurance contributions in the Budget as part of efforts to raise funds to improve public services. A planned increase to the National Living Wage will also impact on some firms from next year.

The make-up of the Entrepreneurs’ Forum generally makes it one of the more optimistic business groups, but its snap poll found that 77% of those questioned disagreed that the Budget would help entrepreneurs to grow the economy, while only 6% agreed that the Budget would help growth.

The findings have come as official figures suggested the º£½ÇÊÓƵ economy unexpectedly contracted in October, marking two months in a row of negative growth for the first time since the pandemic. The Office for National Statistics (ONS) said gross domestic product (GDP) contracted 0.1% in October. Most economists had been expecting GDP to rise by 0.1% during the month.

Entrepreneurs’ Forum CEO Elaine Stroud said: “Our region’s entrepreneurs are projecting lower growth in both turnover and headcount in their businesses than previously reported. 41% are forecasting either no growth or decreases in turnover in the next 12 months (up from 18% reported in the last quarter). This does, of course, mean that 59% are still expecting top line growth, although the number forecasting growth over 20% has decreased from 32% to 16%, indicating growth will may be lower.

“Although 40% of businesses still expect to increase headcount in 2025, this is down from 65% of businesses that reported expansion plans last quarter. As with the reduced sales forecasts, there was a drop in the number of businesses expecting to grow headcount by more than 20%. This fell from 23% down to just 7%. This survey also found 14% expect to decrease headcount, compared to just 3% planning decreases when asked last quarter.

“Is there any good news? Yes, our members know the parameters and direction of travel of the new Government and will work to overcome challenges. Whilst those feeling optimistic or very optimistic has fallen from 86% to 66%, an overwhelming two-thirds of entrepreneurs are still positive. Most see opportunities within their existing markets and nearly half expect to launch new products of services next year.”

The latest figures from the ONS follow a 0.1% estimated fall in September – meaning it is the first time the economy has contracted for two consecutive months since March and April 2020, during the onset of the Covid-19 pandemic. It marks a fractional shift in the outlook for the economy after it eked out 0.1% growth over the latest quarter, between July and September.

The ONS said the services sector, which accounts for the largest proportion of the country’s output and employment, recorded no growth in October after also stalling in September.

Ms Reeves said: “The numbers on today’s GDP are disappointing, but it’s not possible to turn around more than a decade of poor economic growth and stagnant living standards in just a few months.

“Growth is the number one mission of this Government – economic growth that results in families feeling better off with more money in their pockets – and we’re driving that economic growth and we hope that those numbers will start to improve because of the policies that we’re pursuing in the months ahead.”