IoD Business sentiment ends the year in a relatively depressed place

Having been gradually ticking up since its recent nadir of -30 in June 2023, the IoD Directors’ Economic Confidence Index, which measures business leader optimism in prospects for the UK economy, fell back to -28 in December from -21 in November.

However, despite the decline in the headline indicator, business leaders’ confidence in their own businesses rose to +36 in December, up from +30 in November.

In addition, both revenue and export expectations grew in December:

  • Net outlook for revenue for the next 12 months, compared to the last 12 months, increased from +37 in November to +42 in December
  • Net outlook for exports rose from +15 in November to +20 in December

Other underlying indications have remained broadly flat:

  • Business investment expectations held at +23, compared to +22 in November
  • Expectations for costs and wages remained at +74 and +69 respectively
  • Headcount expectations remained at +24, compared to +25 in November

Dr. Roger Barker, Director of Policy at the Institute of Directors, said:

“Director sentiment ended the year in a relatively depressed place. According to our members, it has been more or less stuck in the doldrums since last Summer. Although aspects of the business environment have improved in the last couple of months, particularly with regard to inflation, this is not yet exerting a meaningful impact on business decision-making. Business leaders remain extremely cautious about the outlook for the wider economy over the next 12 months, although they are more optimistic about the prospects for their own organisations.

“In the coming months, the Bank of England will be considering its next step in term of interest rates. Based on the evidence of this survey, an early cut in interest rates would be justified in terms of helping to kick-start business confidence. With inflationary pressures abating, business is in dire need of a boost if it is help drive meaningful economic growth in 2024.”

The IoD Directors’ Economic Confidence Index measures the net positive answers from members of the Institute of Directors to the question ‘How optimistic are you about the wider UK economy over the next 12 months?’ on a five-point scale from ‘very optimistic’ to ‘very pessimistic’.

New data points will continue to be made available on the first day of each month containing data obtained from a survey of IoD members that is in the field during the previous month.

Full survey results

703 responses from across the UK, conducted between 14-29 December 2023. 15% ran large businesses (250+ people), 19% medium (50-249), 21% small (10-49 people), 31% micro (2-9 people) and 13% sole trader and self-employed business entities (0-1 people).

How optimistic are you about both the wider UK economy and also your organisation over the next 12 months?

Very optimistic
Quite optimistic
Neither optimistic nor pessimistic
Quite pessimistic
Very pessimistic
Don't know
Wider UK economy
2.4%
20.8%
25.7%
40.4%
10.5%
0.1%
Your (primary) organisation
11.1%
41.8%
29.4%
14.8%
2.3%
0.6%

Comparing the next 12 months with the last 12 months, what do you believe the outlook for your organisation will be in terms of:

Much higher
Somewhat higher
No change
Somewhat lower
Much lower
Don't know
N/A
Business investment
3.8%
36.0%
39.7%
10.8%
6.3%
0.9%
2.6%
Cost
10.8%
67.3%
16.2%
3.0%
0.9%
0.4%
1.4%
Exports
3.1%
23.5%
29.6%
3.8%
2.8%
1.6%
35.6%
Headcount
2.0%
33.3%
50.4%
8.7%
2.7%
0.9%
2.1%
Revenue
7.1%
51.1%
22.5%
13.2%
3.4%
1.1%
1.6%
Wages
9.4%
62.0%
22.8%
2.0%
0.9%
0.9%
2.1%

Better directors for a better world

The IoD supports directors and business leaders across the UK and beyond to learn, network and build successful, responsible businesses.
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