LONDON, Oct 7 Reuters British firms have grown more downbeat about the outlook as concerns about the tax impact of the new Labour government39;s upcoming autumn budget and conflict in the Middle East dampened sentiment, a survey showed on Tuesday.

The British Chambers of Commerce said 48 of 5,152 companies it surveyed between Aug. 19 and Sept. 16 reported that taxation was a main area of concern ahead of the budget. This is up from 36 in the previous survey.

Many businesses are increasingly anxious about the direction of economic policy, and taxation has now become their primary concern, David Bharier, BCC head of research, said. The major escalation in the Middle East conflict will also be a significant factor.

British finance minister Rachel Reeves, who is due to make her inaugural taxandspending autumn statement, has warned some taxes might increase in the Oct. 30 budget.

Reeves is expected to change the government39;s fiscal rules for bringing down public debt, which could pave the way for more borrowing, potentially helping to boost investment and economic growth.

British government debt in August hit 100 of economic output  levels not seen on a sustained basis since the early 1960s.

The BCC survey showed 56 of businesses expected turnover to increase over the next 12 months, down from 58 in the second quarter, and most no longer expected profits to rise.

Just over one in five said they had increased investment.

Investment levels remain the Achilles heel…