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Business optimism rises, sort of

The media’s ‘Burnham Bounce’ seemed absent from the latest Institute of Directors (IoD) Economic Confidence Index. Fewer than 24% felt optimistic that Mr Burnham and his new cabinet would improve either their business outlook or that of the UK.

One standout statistic was the proportion of respondents concerned about climate change and extreme weather events. This has more than doubled, rising to 17% from 7%.

While the August survey showed overall optimism rising slightly for the UK’s prospects, the view was more negative for their own business. The Index measures business leader optimism with underlying indicators showing modest improvements across the board during the month.

  • Revenue expectations increased.
  • Headcount expectations were little changed.
  • Investment intentions improved slightly.
  • Export expectations remained stable.
  • Cost expectations remained elevated.

Despite an improved level of confidence, the impact of the new Prime Minister and Cabinet on business leaders’ optimism was in negative territory, with over 76% believing there would be no change or had a pessimistic view of the change.

When asked about the factors holding back business growth and investment, business leaders overwhelmingly pointed to uncertainty. Tax uncertainty (58%), general policy uncertainty (55%) and demand uncertainty (40%) were the most frequently cited barriers. Weak expected demand (27%) and labour and skills shortages (23%) also featured.

Among the factors harming businesses (asked quarterly):

  • UK economic conditions remain the most significant factor impacting business (selected by 73% of survey respondents, down from 75%).
  • Concerns about taxation increased sharply, with employment taxes rising to 62% from 54%, and business taxes rising to 56% from 47%.
  • Compliance with government regulations (40%, up from 35%) and the cost of energy (38%, up from 35%) both overtook global economic conditions (36%, down from 43%) as sources of concern.

Several areas of risk saw notable increases in pessimism. Citations of misuse of artificial intelligence rose to 36%, from 29% in May, while concern about a global trade war increased to 31%, from 24%.

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