Director Weekly Reasons to be cheerful

The latest official data reveals that the UK economy grew 0.7% in January-March this year – beating expectations of 0.6% growth.

It is welcome news – but not, perhaps, a complete surprise. April’s IoD Directors’ Economic Confidence Index showed a modest recovery, reaching the highest level since September 2024. While the Index remains low, this is the second month of improvement.

So what’s underpinning the uptick? I’ve been exploring the survey feedback provided by directors who indicated they’re optimistic about the next 12 months – and discussing the outlook with IoD members at recent events. Three reasons to be cheerful stand out.

1. The UK is open for business

The uncertainty surrounding the global trade system in recent weeks has been deeply destabilising. Tariff turmoil is sure to push down on activity in the months ahead.

Yet what emerges from the survey data and discussions with IoD members is a sense of resilience and confidence that the UK is navigating the turbulence effectively. Business leaders largely endorse Keir Starmer’s approach: in our latest survey, 42% of directors backed a strategy of giving equal priority to deals with the US and Europe. Although 34% would like to see a pivot towards the EU, the government’s success in securing a US deal – the first signed by the second Trump administration – arguably justifies its approach.

That the US trade deal came just two days after the UK-India trade deal was a further boost. Of course, only 11.8% of UK businesses trade internationally, so the direct benefit of better access to US and Indian markets is limited. But there is another more wide-reaching – if less tangible – effect.

The deals show that Britain is open for business. They reflect the UK’s enduring global reach, and sustained overseas interest in engaging with the UK as a trading partner. And that’s giving business leaders some confidence about our economic prospects over the years ahead.

2. Distance from the Autumn Budget

Another factor surfacing in discussions is a sense of distance from the Autumn Budget, which did so much to undermine confidence. Businesses remain frustrated by the government’s slow progress on policies to support them to grow, given that it has raised their costs, but the absence of further domestic policy shocks is leading to reports that some momentum is starting to come back.

We’re also seeing the effect of helpful tailwinds, particularly in consumer demand. Consumers are sitting on substantial savings, enjoying reasonably high real earnings growth, and now, with interest rates falling, seeing mortgage payments drop. This is reported to be feeding through to spending in some consumer-facing sectors.

3. Opportunities in strategic infrastructure

The third cause for optimism stems from the government’s strategic priorities. Defence is benefiting from the promise of increased government expenditure. The drive to simplify planning law will create opportunities for the construction industry. Renewables and nuclear energy are central to government energy plans, while companies in supply chain resilience and cyber security are enjoying healthy markets too.

It would be an exaggeration to declare that the British economy is booming. There are many downside risks to growth in the coming months. But UK businesses are resilient – and there are some real pockets of positivity.

Read the IoD’s response to the latest economic data here.