New data from the Institute of Directors shows the drop in business confidence that was picked up in June has been sustained into July.

The monthly IoD Directors’ Economic Confidence Index, which is the most-timely indicator of UK business sentiment, fell from -6 in May to -31 in June, suggesting a significant deterioration in the business environment. Today’s data for July gives a similar reading of -30 confirming that the deterioration in June was a substantive change rather than a monthly blip.

Other indicators from July’s survey have also remained stable on the month, but weaker than earlier in the year:

• The index of business leader optimism for the future of their own organisation steadied at +30 in July, similar to the +29 recorded in June (+44 in May)
• Investment intentions also steadied at +12 in July similar to +11 in June (+22 in May)

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

“Business leaders are feeling a mid-year slump in confidence compared to earlier in the year: the IoD Directors’ Economic Confidence Index has now come in at the relatively low level of around -30 for the second month in a row.

“With inflation proving more persistent than was previously expected, and more firms starting to experience the negative impact of rising interest rates, there is a greater sense of caution in the air than in the Spring. Although our data still suggests economic growth, investment intentions are lower due to increased awareness of external economic risk.”