Economic confidence unchanged after Budget

The IoD Directors’ Economic Confidence Index, which measures business leader optimism in prospects for the UK economy, rose to -45 in October 2026 in the run-up to the Budget, from -54 in September, the highest the index has been since May 2025.

The Chancellor’s Budget did not have a significant impact on the headline index. In a snap poll immediately following the Budget, the index was little changed at -43.

Business leaders’ confidence in their own organisations rose ahead of the Budget to +19 in October, from +10 in September. However, the post-Budget snap poll showed organisational confidence dropped back to -1.

In the underlying data, revenue expectations increased to +28 in October ahead of the Budget from +21 in September, the highest level since July 2024 (and just above the long-run average of +27 since 2016). However, post-Budget, this dropped to +8 – its lowest since December 2025.

Cost expectations were little changed at +78, from +79 ahead of their Budget, well above the series average (+67). Post-Budget they edged up to +81 whilst investment intentions increased to +1 ahead of the Budget, from -8, their highest since August 2024 (long-run average +5). Post-Budget, they dropped back down to -9.

Headcount expectations rose to +2, from -2 ahead of the Budget, their highest since April 2025 (long-run average +10). Post-Budget, they fell to -6, and export intentions rose to +13, from +8, the highest since June 2024 (long-run average +9). Post-Budget, they dipped back to +8.

Anna Leach, Chief Economist at the Institute of Directors, said “Our October survey, which closed just before the Chancellor’s Budget speech, showed an ongoing recovery in confidence in the wider UK economy, with our Decision Makers Economic Confidence Index at its highest level since May 2025. Encouragingly, businesses’ expectations for their own performance had recovered substantially, with confidence in their own organisations and revenue expectations returning to around September 2024 levels, and investment and hiring intentions moving back into positive territory.

“However, our post-Budget snap poll suggests the Budget has done little to encourage business leaders to take their investment and recruitment plans out of mothballs. While confidence in the wider economy held up, revenue expectations fell sharply to their weakest in ten months, while investment and hiring intentions also deteriorated.

“Ahead of the Budget, business leaders were clear that they wanted the Chancellor to address the deterioration in the public finances. Three-quarters favoured reducing welfare spending, nearly six in ten supported reducing departmental spending, and four in ten wanted reforms to make the pensions triple lock less expensive. Instead, the Chancellor has allowed fiscal headroom to fall substantially, leaving the public finances with relatively little protection against further shocks. With the Milburn and Timms reviews due shortly, there is an opportunity to develop welfare reforms that both improve employment outcomes and put spending on a more sustainable footing. But the Chancellor has not committed to bringing the welfare bill down within this Parliament.

“With difficult decisions on spending still ahead and limited fiscal headroom, businesses will be concerned that the risk of further tax increases has not gone away. After two years of weak business confidence, the priority remains to provide a more stable and supportive environment in which firms can invest, recruit and grow.”