The IoD Directors’ Economic Confidence Index, which measures business leader optimism in prospects for the UK economy, rose to -3 in May 2024 from -10 in April, the highest level the Index has reached since September 2021 (-1).

There were also notable improvements in business leaders’ investment intentions, which jumped from +21 in April to +30 in May, and headcount expectations, which spiked from +20 in April to +30 in May.

Meanwhile, export expectations have been declining steadily since December 2023 (+20), and experienced a further minor drop from +14 to +13 from April to May.

Business leaders have consistently viewed UK economic conditions (64%) and skills shortages (44%) as the top two issues that they are most concerned about. However, the cost of energy has fallen down the list of concerns from third (35%) in February to sixth (29%) in May, whilst compliance with government regulation has increased from sixth (27%) to fourth (33%).

Business leaders’ confidence in their own organisations remains stable at +41, up from +38 in April.

Dr. Roger Barker, Director of Policy at the Institute of Directors, said:

“The confidence of business leaders in UK economic prospects has reached its highest level for three years, which is a welcome fillip for the business community.

“The data still doesn’t suggest that business leaders are ‘optimistic’ about growth prospects. Rather, their sentiment has moved into a ‘neutral’ phase after having been relatively pessimistic for much of last year.

“Hence it is premature to suggest that this is an economy in full health or ‘going gangbusters’. Green shoots are clearly visible, and the direction of travel is positive. But there are no grounds for complacency. Many businesses remain fragile, and the need for an urgent policy transition away from high interest rates remains acute.”