Directors’ confidence in the UK macroeconomy is “as low as in the early pandemic”

The June 2022 Directors’ Economic Confidence Index, which measures business leader optimism in prospects for the UK economy, fell to -60 in June, its lowest level since the early months of the pandemic, down from -45 in April.

Of those that said they were pessimistic about the prospects for the UK economy, the overwhelmingly most frequent reason given for this pessimism was the UK rate of inflation (42%), followed by difficulties in the UK’s trading relationship with the EU (18%). These reasons are broadly unchanged from last month.

The index of confidence in business leaders’ prospects for their own organisations remained in positive territory but fell from +30 to +23, reversing the slight gains made in April and May.

In addition:

• Nearly nine in ten (87%) of business owners expect their costs to rise in the next 12 months: a record high
• The top three issues that directors report as having a negative impact on their organisation are ‘UK economic conditions’ (58%), followed by ‘skills shortages/employee skills gaps’ (47%) and ‘employment taxes’ (42%)
• A third of businesses (33%) are planning to increase employment in the year ahead, whilst 13% are planning to reduce their headcount
• Similarly, 31% of business leaders intend to raise levels of investment in the next 12 months, compared to 19% who intend to reduce investment

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

“Inflation is not only raising costs but is also raising concern about the macroeconomy to levels not seen since the early days of the pandemic.

“Although many business leaders are still planning for growth, they see the external economic environment as working against them, in the form of inflation, staff shortages and the government’s own decision to raise employers’ national insurance.

“When the external environment feels as risky as it does at the moment, government policy needs to work even harder to incentivise firms to undertake the investment our economy needs. We’re therefore calling on the Chancellor to permanently extend the capital investment super-deduction beyond its March 2023 cut-off.”

The Directors’ Economic Confidence Index measures the net positive answers from its members 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

431 responses, conducted between 13th-27th June 2022

How optimistic are you about both the wider UK economy and also your organisation over the next 12 months?

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. 

Which of the following factors, if any, are having a negative impact on your organisation?

Comparing the next 12 months with the last 12 months, what do you believe the outlook for your organisation will be in terms of: