Rachel Reeves has been warned that her number one mission to boost Britain’s economy is at risk amid fresh evidence that the budget has damaged business confidence after tremors in the financial markets. With the government under pressure to defend its tax and spending plans, business leaders said the chancellor had failed to halt a rapid deterioration in sentiment among company bosses ahead of the budget, with damaging consequences for their investment intentions. In a snap poll of more than 700 members of the Institute of Directors, the lobby group said two-thirds felt negatively about the budget and thought that it would not support the government’s growth mission. Roger Barker, the director of policy at the Institute of Directors, said: “Even before the chancellor had risen to deliver her budget speech, the confidence of business leaders had hit its lowest level since December 2022. Based on the results of our snap post-budget poll, it seems likely that sentiment will have deteriorated even further. “By imposing significant new tax burdens on business, the government has taken a major risk with the economic recovery. The viability of its future spending plans will be compromised if growth is now snuffed out.” The ratings agency Moody’s said the budget would do little to improve Britain’s economic growth, and said Reeves’s plans to add to government borrowing in the near-term would pose an “additional challenge” to repairing the public finances. It comes as the yield – in effect the interest rate – on 10-year government bonds stabilised on Friday morning. The government’s borrowing costs on financial markets had risen sharply over the previous two days since Wednesday’s budget to trade above 4.5%, the highest level this year. City analysts said the reaction was driven by Reeves’s plans to add to the UK’s borrowing levels and the prospect of the Bank of England cutting interest rates by less than previously anticipated. With markets in a delicate position ahead of the US election next week, they also warned investors remained wary of Britain after Liz Truss’s mini-budget. “We expect financial markets to remain more sensitive to the potential for UK policy missteps, because of the gilt market turmoil that followed the September 2022 mini budget,” Moody’s said in a note to clients. Darren Jones, the chief secretary to the Treasury, said the government was in a “very different world” from the market panic two years ago, but suggested that there were lasting consequences. “I think we’ve all got PTSD from Liz Truss,” he told Sky News. The Bank of England is expected to cut its base rate from 5% to 4.75% on Thursday next week. The central bank will publish updated growth forecasts, taking account of the chancellor’s budget. Leading economists and business leaders said the government could struggle to turn around Britain’s growth prospects after announcing large tax rises on businesses and plans for public investment that would take years to pay off. The latest snapshot from the manufacturing sector show that factory output fell in October as worried industrial firms braced for the budget. The purchasing managers’ index (PMI) for the sector slumped into contraction, according to the survey of manufacturing bosses compiled before the tax and spending event.