IoD: ‘Directors’ economic confidence at lowest point in 2018’

Business leaders’ confidence in the economy has fallen to its lowest point in 2018, a new survey from the Institute of Directors reveals today.

There was some optimism earlier in the year, following the progress made on phase one of Brexit negotiations in December. However the IoD’s Confidence Tracker shows that since April net confidence has fallen 19 percentage points back into the red.

Meanwhile, firms’ expectations for future investment and employment remained subdued, while a majority of directors anticipated rising costs for the year ahead.

After the UK’s general economic conditions, uncertainty around trade with the EU was the biggest concern of business leaders, having fallen out of the top three earlier in the year.

While optimism about the wider economy sunk, bosses remained buoyant about the prospects of their own firms, with a net balance of 37% having a positive outlook. However, this lies below the average firm-level confidence for the first six months of the year.

Tej Parikh, Senior Economist at the Institute of Directors, said:

“Despite cautious optimism emerging amongst the business community earlier in the year, any momentum appears to have dwindled. In terms of directors’ outlook for the economy, we’re heading back to the levels of pessimism we saw before progress was made on phase one of Brexit talks.

“With firms’ investment decisions clearly sensitive to Brexit developments, it was additionally disappointing to see the Bank of England pull the trigger on a rate rise before the crucial October summit. Policy-makers must stay wary of the fragility of business confidence at this point in time.

“But Brexit isn’t the only burning matter for British businesses. The downbeat mood is endemic across organisations of all shapes and sizes. On top of their greater exposure to the EU, larger businesses in particular have been buffeted by a variety of fresh headwinds, from oil price rises to the prospect of a trade war. Meanwhile smaller enterprises, the backbone of the economy, are suffering under the weight of high costs, skills shortages, and weak productivity.

“It’s unfortunate that the Brexit process has limited the bandwidth of Government to meet equally pressing domestic economic challenges – that needs to change sooner rather than later.”