Revenue expectations strengthen but outlook remains subdued

The IoD Directors’ Economic Confidence Index, which measures business leader optimism over prospects for the UK economy, fell to -54 in September, from -49 in August 2026.

In contrast, business leaders became significantly more optimistic about the prospects for their own organisations, with confidence rising to +10, from -5 in August.

The data showed that revenue expectations increased to +21 from +12, but remained below the long-run average of +27, whilst cost expectations fell to +79, from +83 in August – their lowest since September 2024, but remaining well above the series average (+67).

Investment intentions were little changed, at -8 from -9 in August (long-run average +5), whilst headcount expectations rose to -2, from -6 (long-run average +10) and export intentions rose to +8, up from +4 last month

Anna Leach, Chief Economist at the Institute of Directors, said “September’s results show a growing divide between confidence in businesses’ own prospects and confidence in the wider economy. Business leaders are more confident about their own organisations, and revenue expectations have strengthened. But cost pressures remain high, squeezing margins and leaving some firms having to ‘run to stand still’. Investment and hiring intentions unsurprisingly therefore remain subdued.

“As in August, firms appear to be becoming more confident in their ability to navigate difficult conditions, rather than seeing those conditions materially improve. Exporters are benefiting from stronger demand in some overseas markets, while AI is creating new opportunities and helping firms raise productivity. At the same time, uncertainty remains high, and the conflict in the Middle East is adding to energy, transport and supply-chain costs and risks.

“The Chancellor’s conference speech recognised the high cost of doing business and reaffirmed the importance of fiscal discipline and growth. Businesses will now be looking to the Budget for delivery: greater certainty in the cost environment and concrete action to improve the economics of investing and hiring in the UK, not least by addressing high energy costs.”