The June 2022 Directors’ Economic Confidence Index, which measures business leader optimism in prospects for the UK economy, fell to -60 in June, its lowest level since the early months of the pandemic, down from -45 in April.

Of those that said they were pessimistic about the prospects for the UK economy, the overwhelmingly most frequent reason given for this pessimism was the UK rate of inflation (42%), followed by difficulties in the UK’s trading relationship with the EU (18%). These reasons are broadly unchanged from last month.

The index of confidence in business leaders’ prospects for their own organisations remained in positive territory but fell from +30 to +23, reversing the slight gains made in April and May.

Kitty Ussher, Chief Economist at the Institute of Directors, said:

“Inflation is not only raising costs but is also raising concern about the macroeconomy to levels not seen since the early days of the pandemic.

“Although many business leaders are still planning for growth, they see the external economic environment as working against them, in the form of inflation, staff shortages and the government’s own decision to raise employers’ national insurance.

“When the external environment feels as risky as it does at the moment, government policy needs to work even harder to incentivise firms to undertake the investment our economy needs. We’re therefore calling on the Chancellor to permanently extend the capital investment super-deduction beyond its March 2023 cut-off.”