Firms now fear that Mr Burnham, who is widely expected to become prime minister this month, will unleash further tax increases on businesses.
David Owen, at S&P Global, said: “Survey responses signal that a triple squeeze from rising labour costs, worries about government taxation and weak consumer demand have made services firms more hesitant to commit to spending.”
The survey was conducted between June 11 and 26, during which time Mr Burnham won the Makerfield by-election and Sir Keir Starmer confirmed he would resign as prime minister.
Mr Burnham has promised to stick to Labour’s manifesto pledge not to increase income tax, VAT or National Insurance. But in an interview with LBC last week, he said there was “some room within that manifesto for movement on tax”.
The drop in business confidence was most acute in the services sector, which tumbled to its lowest level in more than three years, as firms grappled with the increase in labour costs and worries about a fresh surge in inflation fuelled by the Iran war.
The figures showed that the proportion of businesses in the services sector that expect a decline in output over the next year rose to its highest level on record, excluding the aftermath of the 2008 financial crisis and Liz Truss’s ill-fated mini-Budget in 2022.
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