IoD: Confidence in UK economic prospects reaches its highest level for three years

The IoD Directors’ Economic Confidence Index, which measures business leader optimism in prospects for the UK economy, rose to -3 in May 2024 from -10 in April, the highest level the Index has reached since September 2021 (-1).

There were also notable improvements in business leaders’ investment intentions, which jumped from +21 in April to +30 in May, and headcount expectations, which spiked from +20 in April to +30 in May.

Meanwhile, export expectations have been declining steadily since December 2023 (+20), and experienced a further minor drop from +14 to +13 from April to May.

Business leaders have consistently viewed UK economic conditions (64%) and skills shortages (44%) as the top two issues that they are most concerned about. However, the cost of energy has fallen down the list of concerns from third (35%) in February to sixth (29%) in May, whilst compliance with government regulation has increased from sixth (27%) to fourth (33%).

Business leaders’ confidence in their own organisations remains stable at +41, up from +38 in April.

Dr. Roger Barker, Director of Policy at the Institute of Directors, said:

“The confidence of business leaders in UK economic prospects has reached its highest level for three years, which is a welcome fillip for the business community.

“The data still doesn’t suggest that business leaders are ‘optimistic’ about growth prospects. Rather, their sentiment has moved into a ‘neutral’ phase after having been relatively pessimistic for much of last year.

“Hence it is premature to suggest that this is an economy in full health or ‘going gangbusters’. Green shoots are clearly visible, and the direction of travel is positive. But there are no grounds for complacency. Many businesses remain fragile, and the need for an urgent policy transition away from high interest rates remains acute.”

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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’.

 

Full results

418 responses from across the UK, conducted between 14-29 May 2024. 14% ran large businesses (250+ people), 19% medium (50-249), 26% small (10-49 people), 30% micro (2-9 people) and 10% sole trader and self-employed business entities (0-1 people).

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  2.6%  28.5%  34.4%  28.5%  5.7%  0.2%
Your (primary) organisation  8.6%  47.1%  29.2%  11.5%  2.9%  0.7%

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

UK economic conditions  64.4%
Skills shortages and/or labour shortages  44.5%
Global economic conditions  33.3%
Compliance with government regulation  33.3%
Business taxes  33.0%
Cost of energy  29.2%
Trading relationship with the EU  25.6%
Employment taxes  25.1%
Difficulty or delays obtaining payment from customers  18.7%
Cost/availability of finance  18.4%
Transport cost/speed/reliability  17.0%
Supply chain disruption  15.6%
Broadband cost/speed/reliability  11.2%
None  2.6%

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  N/A
Business investment  4.5%  36.1%  45.2%  7.2%  3.8%  1.9%  1.2%
Costs  14.4%  67.2%  13.2%  3.3%  0.5%  0.7%  0.7%
Exports  3.3%  15.6%  36.4%  5.3%  1.0%  1.4%  37.1%
Headcount  2.9%  37.8%  46.4%  8.9%  2.2%  0.7%  1.2%
Revenue  5.5%  53.6%  24.9%  12.0%  2.4%  1.0%  0.7%
Wages  5.5%  62.2%  26.8%  3.3%  0.0%  1.2%  1.0%