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?

Very optimistic Quite optimistic Neither optimistic nor pessimistic Quite pessimistic Very pessimistic Don’t know
Wider UK economy 2% 11% 14% 42% 31% 0%
Your (primary) organisation 7% 36% 36% 16% 4% 0%

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 314
The international price of energy 11%
The rate of inflation in the UK 42%
UK sanctions against Russia being stronger than in other countries 1%
Falling customer demand in the UK 13%
Supply chain problems affecting the UK 6%
Difficulties in the UK’s trading relationship with the EU 18%
Don’t know 1%
Other (please specify) 9%

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

New trading relationship with the EU 38%
Compliance with Government regulation 35%
Business taxes 36%
Employment taxes 42%
Broadband cost/speed/reliability 15%
Cost of energy 52%
Global economic conditions 40%
Difficulty or delays obtaining payment from customers 16%
Skills shortages/employee skills gaps 47%
UK economic conditions 58%
Coronavirus outbreak 18%
Transport cost/speed/reliability 29%
Cost/availability of finance 11%
Supply chain disruption 29%
Other (please specify) 4%
None of the above 1%
Don’t know/Not applicable 1%

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 9% 46% 23% 17% 4% 0%
Cost 23% 65% 11% 1% 0% 0%
Business investment 5% 26% 50% 14% 5% 0%
Employment 3% 31% 52% 11% 2% 1%
Employee wages 11% 57% 27% 3% 1% 1%