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Business leaders’ confidence sinks to lowest point in 18 months

27 Dec 2018

Digital financial market chartBusiness leaders’ confidence in the British economy has sunk to its lowest level in over 18 months, surpassing the collapse in optimism that followed the inconclusive result of the 2017 general election, a new poll of over 700 company directors reveals.

The IoD’s Confidence Tracker showed that overall optimism had briefly reached positive territory earlier this year following the initial agreement of a Brexit transition period, but has fallen steadily since April and hit its lowest point this month. All regions and nations of the UK are now reporting a pessimistic outlook for the 12 months ahead.

Investment levels are also likely to remain subdued in the same period (with a net balance of just 7% of business leaders expected to invest more). Meanwhile, the top concerns for directors, besides the UK’s general economic conditions, are the uncertain trading future with the EU and skills shortages.

While business leaders were pessimistic about the economy, confidence in their own firms remained relatively upbeat. In general, firm-level optimism has been less badly affected by political events in 2018 than overall economic confidence.

Winter 2018 Confidence Tracker

For further information, see the IoD’s Confidence Tracker

Tej Parikh, Senior Economist at the Institute of Directors, said:

“Business leaders are looking ahead to the new year with trepidation about the economy.

“While we saw cautious optimism emerging when the Brexit talks appeared to be moving towards a transition period after March 2019, that has utterly dissipated now. There can be no doubt that the tumultuous Brexit process is having a damaging impact on firms’ outlooks. The prospect of a no-deal in the near future will be weighing heavily on directors’ minds.

“Uncertainty is already causing businesses to delay investment, hiring decisions and product launches, which also acts to weaken our international competitiveness further down the line. The longer this state of affairs continues, the more we lose by it, even if these effects aren’t apparent in the here-and-now.

“Firms are clearly facing a challenging environment, but our members are still optimistic about their own companies, indicating that the weakness is in politics rather than inherent in British business.

“Politicians must not forget that every day of Brexit confusion is a day we aren't focussed on the long-term. Leaving the EU has consumed the political agenda since the referendum, deflecting attention from critical challenges we face, including boosting growth across the UK and addressing widening skills gaps.”

Winter 2018 Confidence Tracker

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