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Investment and hiring outlook dips as coronavirus restrictions return

08 Oct 2020

cogs of the economy

The recovery in business leaders’ investment and hiring intentions has stalled, new figures from the Institute of Directors reveal.

Company directors’ net employment expectations for the year ahead remain negative, and actually fell slightly in September (from -6 to -11), while intended investment also failed to improve (dipping from -8 to -10). Both metrics are up from their record lows in May but below normal.

The IoD's Autumn Confidence Tracker found that the recent improvement in directors’ outlook for their own firms slowed as well. However, their confidence in the wider economy continued to gradually lift, though it remains negative.

Directors' confidence about the economy varied between different regions, with those in Yorkshire, the East Midlands, and the North of England notably less negative than those in London or Scotland.

Aside from coronavirus and the wider economic conditions, the top concern of business leaders surveyed was uncertainty over trade with the EU. This was followed by broadband problems and skills gaps, suggestive of the impact of remote working.

The IoD called on government to spur job creation by cutting employment taxes, drive up business investment through tax relief incentives, and extend its suspension of wrongful trading rules to give directors more breathing space to see their organisations and people through the crisis.

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Tej Parikh, Chief Economist at the IoD, said:

“The overall business outlook appears to be stuck in the doldrums. The current restrictions put a lid on demand for a number of sectors, but local lockdowns and the prospect of stricter measures down the road are putting even more businesses in a bind. It’s crucial that the test and trace system can start firing on all cylinders to ease some fears. Ongoing support for firms' cashflow will also be crucial.

“With hiring intentions bleak and redundancies expected in sectors such as hospitality, the Treasury should step in to support job creation. Lowering employment costs will be crucial to help firms that are doing well to pick up the slack.

“The Prime Minister rightly emphasised the UK’s long-term productivity challenge this week. Business investment will be key to any attempt to lift output, but this could be limited by the impacts of the virus. Giving SMEs extra headroom through tax reliefs to spend on new technology and adaptations could help raise business spending.”

Coronavirus Hub - IoD

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