Directors’ confidence remains low

The Institute of Directors’ latest Economic Confidence Index, which measures business leader optimism in prospects for the UK economy, rose only slightly last month – from a negative reading of -25 in October to -21 in November. Since plummeting in June, business confidence has been gradually ticking upwards over the last five months. However, the balance of optimism/pessimism remains firmly entrenched in negative territory.

Business leaders are more optimistic about the prospects for their own organisations than they are for the economy as a whole. However, the balance who are positive declined slightly last month – from +37 in October to +30 in November.

‘UK economic conditions’ and ‘skills shortages’ remain the top two negative issues for business leaders. ‘Cost of energy’ and ‘business taxes’ also remain big challenges for business. However, ‘Global economic conditions’ has replaced ‘trading relationship with the EU’ as a top 5 business concern, possibly reflecting concerns about recent developments in the Middle East.

The positive balance of director sentiment in terms of investment intentions which was recorded in October seems to be persisting, and currently sits at +22.

Wage cost pressures appear to be slightly easing, indicating that lower inflation and tighter interest rates are starting to impact on the labour market.

Dr. Roger Barker, Director of Policy at the Institute of Directors, said “Last month we saw a slight improvement in directors’ confidence. However, the underlying picture is broadly unchanged since June. Business leaders’ confidence in the UK economic prospects remains firmly in pessimistic territory, even if they are somewhat more optimistic about the prospects for their own organisations.”

“Although the Autumn statement offered succour to business in the form of permanent full expensing, business leaders are still searching for reasons to jumpstart their confidence for next year. Worryingly, geopolitical instability is starting to weigh on sentiment, and next year may see the return of significant political uncertainty as voters in the UK and other major countries, not least the US, approach key elections.”