Business confidence subdued throughout Q3

3rd October 2023

The IoD Directors’ Economic Confidence Index, which measures business leader optimism in prospects for the UK economy, remained subdued at -26 in September 2023, similar to August’s reading of -28. This is the fourth consecutive month in which economic confidence has been relatively low, following a large drop in June.

Order books were suggestive of mild growth in September, particularly when compared to this time last year, but were weaker than the strong results recorded when the question was last asked in March 2023.

  • 42% said their order books had strengthened in the last 3 months (29% in September 2022, 50% in March 2023)
  • 28% said their order books had weakened in the last 3 months (31% in September 2022, 22% in March 2023)

Similarly, the monthly tracker data also suggests moderate activity in the economy, but trading conditions are particularly difficult for a minority:

  • Around half of business leaders (51%) are optimistic about prospects for their own organisation in the next 12 months but one in five (21%) are pessimistic
  • 34% of business leaders plan to increase investment in the next year, compared to 21% that plan to reduce it
  • 36% plan to increase their staff headcount in the next year, but 15% plan to reduce it

Kitty Ussher, Chief Economist at the Institute of Directors, saidc“The shape of 2023 is now becoming clearer as the data comes in. The new year saw buoyancy and optimism as the recessionary fears from the end of last year receded. Then, as rising interest rates started to bite in June, there was a downwards shift in the mood that persisted throughout Q3.”

“We now see subdued confidence combined with patchy on-the-ground trading conditions that, taken together, are neither great nor disastrous overall. At this point in 2023, presuming interest rates do not rise further, we can therefore still be cautiously hopeful of a soft economic landing from the injection of inflation that began two years ago.

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