IoD: Flat order books show economy teetering on a knife edge

New data from an Institute of Directors (IoD) survey shows a sharp deterioration in the strength of business order books in September, compared to when the question was last asked in July.

In July 2022, around 41% of people running businesses across the UK said that their order books had strengthened over the previous few months, significantly higher than the 28% who said order books had weakened. This is consistent with recently revised ONS data that showed the economy grew in July.

By September the responses to the same IoD survey question had changed substantially, with the proportion of businesses reporting that order books were growing down by 12 percentage points to 29%, similar if slightly less than the 31% who reported order books were weakening.

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

“The economy is teetering on a knife edge. At the beginning of the year, it felt like everything was full steam ahead once firms were released from the remaining shackles of pandemic restrictions. Now that feeling is waning. While IoD data is not yet showing a recession, today’s new data around the strength of SME order books shows a clear flatlining, with as many firms reporting a weakening in demand as are reporting growth.

“The situation is very finely balanced going into the autumn. Optimists could say there is everything to play for, with the priority being the need to restore confidence, but the data is also consistent with a clear downward trend in economic activity with the next stage being a contraction. What our member firms are looking for is evidence that government not only understands the issues they are facing but is also demonstrably capable of taking action to improve the business environment.”