Economic confidence pointing upwards into the New Year; strong support to tackle inflation
The IoD Directors’ Economic Confidence Index, which measures business leader optimism in prospects for the UK economy, rose slightly to -58 in December, up from -64 in November. There were also slight improvements in expectations for revenue, employment, investment and in directors’ optimism for the prospects of their own organisations.
The top issue for the government to address to support business in 2023 is ‘high inflation’, with two-thirds of IoD members choosing this as one of their top priorities for government action. Directors attached far more importance to addressing ‘high inflation’ than ‘recession’, which came a poor second at 35%.
In detail:
- 55% of business leaders expect higher revenue in the next 12 months (21% lower), up from 47% in October
- 30% expect higher business investment (21% expect lower), up from 25% in November
- 31% expect higher employment (13% lower), up from 27% in November
Kitty Ussher, Chief Economist at the Institute of Directors, said:
“Confidence in the economy is still very low, but is pointing upwards into the New Year. It is hugely encouraging, in particular, that the investment plans of IoD members are a little stronger in December than at any time in the last six months.
“Business leaders consider tackling inflation to be far-and-away the most important thing government can do to help them going into 2023. But with around half our members also expecting inflation to have peaked by the Spring (if not before) it’s also important to make rapid progress on underlying structural issues such as skills shortages, our relationship with the EU, the cost of energy, as well as ensuring the economy returns to growth as soon as possible.
“It’s customary to wish for a peaceful New Year. Given the upheaval of the last few months, business leaders will be no exception in hoping for as much stability as possible to enable them to plan.”
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
467 responses, conducted between 12th-30th December 2022
Looking forward to 2023, what are the most important issues for government to address in order to support business? You can select up to 3 of your priorities.
| High inflation | 67% |
| Recession | 35% |
| Levelling up | 3% |
| Skills shortages | 24% |
| Climate change | 13% |
| Labour shortages | 16% |
| Immigration | 6% |
| Business taxation | 19% |
| Regulatory burden | 13% |
| Energy costs | 29% |
| Audit/corporate governance reform | 1% |
| Relationship with the EU | 32% |
| Trading relationships beyond the EU | 5% |
| Infrastructure | 6% |
| Business inclusion and diversity | 0% |
| Late payments | 4% |
| Supplier bottlenecks/shortages | 4% |
| Industrial relations/strikes | 14% |
| Other (please specify) | 5% |
| Don’t know | 0% |
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 | 1% | 10% | 19% | 45% | 24% | 0% |
| Your (primary) organisation | 6% | 37% | 38% | 16% | 3% | 0% |
At what point, if at all, do you expect the rate of inflation in the UK to peak before starting to fall back again?
| Inflation has already peaked | 10% |
| Winter 2022 | 10% |
| Spring 2023 | 30% |
| Summer 2023 | 17% |
| Autumn 2023 | 10% |
| Winter 2023 | 4% |
| Spring 2024 | 6% |
| Summer 2024 | 4% |
| Later than summer 2024 | 4% |
| Never | 0% |
| Don’t know | 4% |
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% | 48% | 24% | 18% | 3% | 0% |
| Cost | 19% | 63% | 14% | 3% | 1% | 0% |
| Business investment | 5% | 25% | 49% | 14% | 7% | 0% |
| Employment | 4% | 27% | 55% | 11% | 2% | 0% |
| Employee wages | 9% | 59% | 29% | 1% | 1% | 1% |
