Business leaders’ confidence in economic outlook remains fragile

The IoD Directors’ Economic Confidence Index, which measures business leaders’ optimism about prospects for the UK economy, dropped back to -63 in February 2026, from -48 in January.

Business leaders’ confidence in their own organisations also fell, to +1 in February from +14 in January. There were also declines in many of the underlying indicators, with revenue expectations falling to +15 in February from +23 in January. Headcount expectations fell to -11 from -2, whilst export expectations fell to +5 from +11.

Other measures were relatively stable, with cost expectations rising to +84 from +81, wage expectations remained the same at +45, whilst investment intentions remained the same at -6

UK economic conditions (77%) remain the most significant concern, unchanged from November 2025. Employment taxes (63%) and business taxes (54%) continue to be of significant concern, up from 60% and 50%, respectively. Levels of concern about compliance with government regulation (45%) rose for the third quarter running (from 37% in November and 32% in August 2025)

Of the global risks that are most concerning for business leaders (asked quarterly), geopolitical tensions (52%, up from 48% in November) has overtaken global economic slowdown (52%, from 59%) as the highest risk factor. There was also concern that the US administration had jumped to 39% from 29%. Concern about cybersecurity has dropped to 49% from 58% and back into third place from second

Anna Leach, Chief Economist at the Institute of Directors, said  “After a welcome recovery in last month’s data, confidence amongst business leaders has ticked down again this month. Revenue and headcount growth expectations have softened while cost expectations have risen, as business leaders continue to grapple with pressures from ongoing rises in employment costs. Taxes and regulatory compliance remain prominent concerns, and a timely reminder of the importance of the government’s deregulatory agenda and the crucial need for business-friendly tax reform. Meanwhile the latest tariff developments have undoubtedly contributed to geopolitical tensions, jumping up the risk agenda in boardrooms.

“As we approach the Spring Statement, the quietness of the newsflow around policy announcements has provided some welcome stability. But the need for swifter delivery of growth-friendly policies is increasingly urgent. UK businesses face intense pressures: rising costs, worsening late payments, and persistent pricing pressures. As we move through the year, momentum on planning reform, defence spending and industrial strategy will be critical. Above all, firms need a coherent growth strategy that clearly sets out priorities and trade-offs — providing the clarity and certainty required to anchor confidence.”