Directors’ economic confidence makes slow progress in September, weighed down by inflation and politics
The September IoD Directors’ Economic Confidence Index, which measures business leader optimism in prospects for the UK economy, has continued its slow crawl upwards but from a very low base, registering a value of –43 for the month of September.
The data was collected between 13th and 29th September. 460 responses were received before the Chancellor’s mini-budget on 23 September and 120 responses were received afterwards. There was no significant difference in the distribution of responses before and after the policy announcements.
Of those that said they were pessimistic about the prospects for the UK economy, when required to choose the main reason for their pessimism, the most popular responses were the rate of inflation in the UK (32%) and political instability in the UK government (21%).
The index of confidence in business leaders’ prospects for their own organisations has fallen back to +20, down from +28 in August. Revenue and employment expectations, while remaining broadly positive, are both tracking downwards. Order books are steadying compared to July, and cost expectations remain extremely high.
In terms of the factors that business leaders say are having a negative impact on their organisation, 54% state UK economic conditions, 46% state global economic conditions, 42% state skills shortages and 37% state the new trading relationship with the EU.
In detail:
- 23% of firms are planning to increase business investment in the next 12 months compared to 25% who plan to reduce it, the first time that a net negative score has been recorded for business investment since October 2020.
- 26% of business leaders are planning to take on more staff in the next 12 months, compared to 15% who plan to reduce headcount.
- 45% expect revenue to be higher in the next year, compared to 28% who expect it to be lower.
- 88% expect costs to be higher in the next year, compared to 2% who expect then to fall.
- 64% expect their employee wages to increase, versus 4% who expect them to reduce.
- 29% say their order books have strengthened in the last few months, down from 41% in July; the proportion who say their order books have weakened has remained steady at 31% in September compared to 30% in July.
Kitty Ussher, Chief Economist at the Institute of Directors, said:
“Directors’ confidence in the UK macroeconomy has recovered slightly in the last quarter as business leaders come to terms with the impact of the war, but remains weighed down by concerns of high inflation and political instability.
“At the same time, we see a softening in revenue and employment expectations which, while still in positive territory, are tracking downwards. Order books are steady, with roughly as many firms saying that their order books are increasing as decreasing, an unsurprising result for a flatlining economy.
“Interestingly, although businesses are undoubtedly concerned about the market reaction to the mini-budget, overall the net impact on confidence appears to be neutral: we found the same distribution of optimistic and pessimistic responses about the UK economy before and after the statement was made on 23rd September.”
The IoD Directors’ Economic Confidence Index measures the net positive answers from members of the Institute of Directors to the question ‘How optimistic are you about the wider UK economy over the next 12 months?’ on a five-point scale from ‘very optimistic’ to ‘very pessimistic’.
New data points will continue to be made available on the first day of each month containing data obtained from a survey of IoD members that is in the field during the previous month.
Full survey results
580 responses, conducted between 13th-29th September 2022
How optimistic are you about both the wider UK economy and also your organisation over the next 12 months
| Very optimistic | Quite optimistic | Neither optimistic nor pessimistic | Quite pessimistic | Very pessimistic | Don’t know | |
| Wider UK economy | 3% | 16% | 19% | 39% | 23% | 0% |
| Your (primary) organisation | 7% | 33% | 38% | 18% | 3% | 0% |
Comparing the next 12 months with the last 12 months, what do you believe the outlook for your organisation will be in terms of:
| Much higher | Somewhat higher | No change | Somewhat lower | Much lower | Don’t know | |
| Revenue | 7% | 38% | 26% | 22% | 6% | 1% |
| Cost | 27% | 61% | 10% | 2% | 0% | 1% |
| Business investment | 3% | 20% | 50% | 17% | 8% | 1% |
| Employment | 3% | 23% | 57% | 12% | 3% | 1% |
| Employee wages | 11% | 53% | 31% | 3% | 1% | 1% |
Which of the following factors, if any, are having a negative impact on your organisation?
| New trading relationship with the EU | 37% |
| Compliance with Government regulation | 31% |
| Business taxes | 27% |
| Employment taxes | 30% |
| Broadband cost/speed/reliability | 17% |
| Cost of energy | 52% |
| Global economic conditions | 46% |
| Difficulty or delays obtaining payment from customers | 17% |
| Skills shortages/employee skills gaps | 42% |
| UK economic conditions | 54% |
| Coronavirus outbreak | 13% |
| Transport cost/speed/reliability | 20% |
| Other (please specify) | 7% |
| None of the above | 2% |
| Don’t know/Not applicable | 1% |
You said you were pessimistic about prospects for the UK economy. Which, if any, of the following factors best describes the reason you said you were pessimistic? Please select one response.
| Total | 361 |
| The international price of energy | 12% |
| The rate of inflation in the UK | 32% |
| Political instability in the UK government | 21% |
| Falling customer demand in the UK | 8% |
| Supply chain problems affecting the UK | 5% |
| Difficulties in the UK’s trading relationship with the EU | 12% |
| Don’t know | 0% |
| Other (please specify) | 9% |
ENDS
Contact for further comments or to arrange interviews:
Hugo Legh
IoD Press Office
Institute of Directors, 116 Pall Mall, London SW1Y 5ED
T: 020 8078 4138
E: press@iod.com
