Directors’ economic confidence rises in January to highest level since the Ukraine invasion

The IoD Directors’ Economic Confidence Index, which measures business leader optimism in prospects for the UK economy, rose to -28 in January 2023, from a near-record low of -58 in December.  This is the most positive level recorded since Russia’s invasion of Ukraine pushed the index down to -33 in March last year.

The index of confidence in business leaders’ prospects for their own organisations also improved in January, rising to +37, up from +24 in December. The last time the index of confidence in directors’ own organisations was at a similar level was February 2022 when it recorded a value of +39.

However, business leader expectations in terms of revenue, cost, headcount and investment intentions for the next 12 months were largely unchanged from December.

Inflation expectations improved, with 24% now believing ‘inflation has already peaked’, up from 10% in December. However, 4 in 10 company directors still do not expect inflation to peak until summer 2023 at the earliest.

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

“This welcome improvement in how business leaders view the UK economy is largely due to a period of relative political calm up to the end of January. Of our members who told us they were pessimistic about future prospects for the UK economy, political instability was less likely to be the main reason for that pessimism compared to the end of last year. Similarly, while inflation is still causing considerable concern, around a quarter of our members now believe it has peaked.

“However, with the index still in negative territory, this month’s improvement is not enough to cause greater investment on the ground: a quarter (27%) of our members plan to increase investment in the next year but a similar proportion (25%) also plan to reduce it.

“The government needs to do more to sharpen investment incentives in capital, people and net zero in the forthcoming Budget to get our economy back on to a firm path towards growth.”

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 

941 responses, conducted between 13^th-29^th January 2023

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:

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?