IoD: Directors’ economic confidence hits three-year high in July
The IoD Directors’ Economic Confidence Index, which measures business leader optimism in prospects for the UK economy, bounced to +7 in July 2024, from -14 in June. This is the highest result that the Index has registered since July 2021 (+22), which was also the last time the Index was positive.
The underlying indicators showed smaller rises: business investment intentions rose from +19 in June to +24 in July, but remained below its most recent peak in May of +30. Meanwhile headcount expectations rose from +22 in June to +24 in July, but likewise remained below their recent peak in May of +30.
Export expectations continued their steady decline from December 2023 (+20), dropping from +15 in June to +12 in July. Wage and cost expectations both rose this month, with wages rising from +52 in June to +60 in July, and costs increasing from +75 to +81.
Business leaders’ confidence in their own organisations held steady at +36 in July.
Anna Leach, Chief Economist at the Institute of Directors, said:
“There’s an encouraging rise in directors’ confidence this month, following last month’s pre-election dip. This looks like an early vote of confidence in the new government, given the smaller movements in the other economic measures which point to modest improvement in economic conditions. We’ve seen welcome consistency in the government’s messaging so far, particularly on the dual priorities of growth and stability. We look forward in particular to working with the government on industrial strategy, skills, workers’ rights and infrastructure policy, to help deliver the stable growth-friendly policy framework that will enable the economy to thrive.
“The rise in wages and costs in our data foreshadows a difficult rate decision for the MPC today. Headline inflation has remained at target for the second month running, but wage growth and services inflation remain at levels inconsistent with inflation remaining there longer term. While a rate cut would provide welcome relief to business, announcements on public sector pay will inject fresh impetus into an economy already outperforming the Bank’s expectations.”
The IoD Directors’ Economic Confidence Index measures the net percent 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
571 responses from across the UK, conducted between 19-30 July 2024. 12% ran large businesses (250+ people), 22% medium (50-249), 24% small (10-49 people), 34% micro (2-9 people) and 8% 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 | 2.10% | 34.85% | 32.92% | 22.42% | 7.18% | 0.53% |
| Your (primary) organisation | 7.53% | 44.66% | 30.65% | 12.26% | 4.38% | 0.53% |
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 | 4.0% | 35.2% | 43.1% | 10.2% | 5.3% | 0.5% | 1.8% |
| Costs | 14.7% | 70.2% | 10.9% | 3.3% | 0.4% | 0.2% | 0.4% |
| Exports | 2.5% | 18.4% | 33.6% | 6.3% | 2.6% | 1.4% | 35.2% |
| Headcount | 2.6% | 35.9% | 46.1% | 11.2% | 3.3% | 0.0% | 0.9% |
| Revenue | 5.3% | 51.7% | 21.9% | 16.1% | 4.6% | 0.4% | 0.2% |
| Wages | 4.9% | 58.8% | 30.8% | 3.2% | 1.1% | 0.5% | 0.7% |
