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The Institute of Directors (IoD) Economic Confidence Index, which measures business leader optimism in prospects for the UK economy, fell to -31 in June 2023, down from -6 in May, wiping out the improvements recorded since the beginning of the year.
The reasons for the drop are greater concerns around inflation and, separately, falling customer demand in the UK. Of those who were pessimistic about the UK economy in June with 33% citing ‘the rate of inflation in the UK’ as their main reason, up from 26% in January. Whilst 19% cited ‘falling customer demand in the UK’ as their main reason, up from 11% in January
The index of business leader optimism in prospects for their own firms also fell between May and June, from +44 to +29. Firms are also more wary to commit to investment: net investment intentions fell from +22 in May to +11 in June.
Kitty Ussher, Chief Economist at the Institute of Directors, said “The surge in optimism and investment plans that we’ve witnessed in recent months came to a shuddering halt in June as business leaders took stock of worse-than-expected inflation data and what that means for interest rates and prospects for the economy overall.”
“With business confidence in the economy plummeting, many investment plans that had only recently been dusted down are now being put on hold again as business leaders consider whether the overall business environment is now too risky to be considering expansion.”
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 |
2.9% |
18.7% |
25.7% |
38.4% |
13.9% |
0.4% |
|
Your (primary) organisation |
8.1% |
42.5% |
27.7% |
17.6% |
3.7% |
0.4% |
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 |
Net positive |
|
Business investment |
3.7% |
29.1% |
42.4% |
16.2% |
5.9% |
0.6% |
2.2% |
10.8% |
|
Costs |
18.8% |
65.2% |
11.2% |
2.6% |
1.2% |
0.4% |
0.6% |
80.2% |
|
Exports |
3.0% |
15.8% |
33.3% |
6.0% |
4.7% |
2.3% |
35.0% |
8.1% |
|
Headcount |
2.2% |
33.5% |
47.7% |
12.1% |
2.9% |
0.5% |
1.2% |
20.7% |
|
Revenue |
6.6% |
48.3% |
20.6% |
18.8% |
4.6% |
0.4% |
0.8% |
31.5% |
|
Wages |
11.9% |
63.4% |
20.7% |
1.3% |
1.0% |
0.5% |
1.2% |
73.0% |
