November data suggests impending recession now part of business mindset

The IoD Directors’ Economic Confidence Index, which measures business leader optimism in prospects for the UK economy, fell to -64 in November, the second lowest figure on record (after the -69 registered in April 2020). In October 2022, the Index recorded a value of -60.

The index of confidence in business leaders’ prospects for their own organisations also dropped back to +18, from +25 in October.

UK (64%) and global (46%) economic conditions are the factors most cited by business leaders as having a negative impact on their organisations. Other factors include business taxes (37%), cost of energy (36%), skills shortages (34%) and the UK’s ‘new trading relationship with the EU’ (34%).

In terms of the outlook for their organisations:

• 47% of business leaders expect higher revenue in the next 12 months (28% expect lower), down from 54% in October
• 25% expect higher business investment (25% also expect lower), down from 29% in October
• 27% expect higher employment (16% expect lower), down from 34% in October

Of the 74% of members who said they were pessimistic about the prospects for the UK economy, 30% gave ‘the rate of inflation in the UK’ (up from 20% in October) as the main reason, whereas those who cited ‘political instability in the UK government’ fell to 27% (from 49% in October).

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

“The reality of an impending recession is now part of the mindset of British business leaders. A massive two-thirds of our members are now citing ‘UK economic conditions’ as having a negative impact on their business.

“The austere tone of the Chancellor’s Autumn Statement, combined with gloomy official forecasts, have cemented views of a negative economic outlook, pushing our Directors’ Economic Confidence Index down to within touching distance of levels last seen at the beginning of the pandemic. However, political instability itself as a contributor to the negative economic mood is less than in the immediate aftermath of the mini-budget, although it still remains on a par with inflation as a reason for economic pessimism.

“Looking forwards, we don’t expect much relief in terms of the prevailing mood. A turning point might come when the rate of inflation starts to fall back, if it leads to a sense that we are through the worst, but our data shows business leaders don’t expect that to happen until well into next year – at the earliest.”

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 

485 responses, conducted between 11^th-29^th November 2022

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

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

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

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. 

At what point, if at all, do you expect the rate of inflation in the UK to peak before starting to fall back again?