The Institute of Directors’ latest economic confidence index, which measures business leaders’ outlook for the UK economy, stood at –73 in November in the days before the budget. Revenue expectations and investment intentions slipped slightly, while concerns about rising costs increased.
Following the budget, several indicators weakened sharply. Revenue expectations dropped from +7 before the announcement to –8 afterwards, the lowest level since September 2020. Expectations for headcount fell from –8 to –29, and investment intentions declined from –17 to –39, the second lowest figure since May 2020.
UK economic conditions remain the biggest concern for directors, cited by 77% of respondents, compared with 76% in August. Employment taxes were highlighted by 60%, while business taxes were identified as a problem by 50%.
Anna Leach, chief economist at the Institute of Directors, said the timing of the budget allowed the organisation to compare sentiment immediately before and after the Chancellor’s statement. She explained that weeks of speculation about tax rises had already dampened confidence, and that with 80% of directors reacting negatively to the budget in a snap poll, overall confidence remained “close to record lows”.
Leach added that optimism within individual organisations had also dropped, showing that the budget had affected not only views of the wider economy but also expectations for firms’ own growth prospects.
She said the UK still needs improvements in planning, regulation and public sector efficiency to strengthen long term growth, warning that the near-term outlook for investment and employment has weakened further.
Leach welcomed the decision to grant unfair dismissal protection after 6 months rather than on day one, calling it a balanced measure that supports hiring while protecting workers.
The economic confidence index is based on the net balance of responses to the question: “How optimistic are you about the wider UK economy over the next 12 months?” Almost 700 directors from businesses of all sizes took part between 14 and 26 November.
Globally, a potential economic slowdown remained the most concerning risk for business leaders, cited by 59% of respondents, compared with 60% in August. Concerns about cybersecurity rose sharply to 58%, up from 44% in August.
