IoD press release Mood music on the economy is not sufficiently cheerful to reverse decline in confidence
The IoD’s Directors’ Economic Confidence Index remained unchanged at –6 in November 2021. This means that slightly more business leaders are negative than positive about future prospects for the UK economy, but the situation has stabilised following sharp falls in the early autumn.
Investment intentions have fallen slightly from a net score of +22 in October to +18 in November. Indicators for future revenue and employment are also lower than the previous month, but expectations of costs (including wages) are slightly higher. An increasing number of respondents are also citing ‘cost of energy’ and ‘employment taxes’ as having a negative impact on their organisation, but the negative effect of the pandemic on firms is declining, albeit from a high base.
Nearly half (45%) of members expect inflation to be running at higher than 4% by this time next year, an 8 percentage point increase from last month (37%).
Business leaders who were not planning to raise levels of business investment were asked what single thing would cause them to change their mind. The single most popular answer was ‘stronger growth prospects for the UK economy’ (34%).
Kitty Ussher, Chief Economist of the Institute of Directors, said:
“The economy is now in a Catch-22 position: growth into 2022 depends critically on private sector investment, but many business leaders are nervous about committing that investment when the UK economic outlook remains uncertain.
“On the plus side, our economic confidence index stopped its fall in November, but with concerns around inflation, high energy prices, continuing staff shortages and the forthcoming rise in employers’ NICs, the mood music is not yet sufficiently cheerful to reverse the decline of previous months. Looking into December, businesses will be carefully considering the implications of the Omicron variant and we expect this to be reflected in the responses to our next monthly survey.”
The Directors’ Economic Confidence Index measures the net positive answers from its members 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’.
The back series, including graph, is available from July 2016 here. 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
580 respondents, conducted between 12th-29th November 2021.
How optimistic are you about both the wider UK economy and also your organisation over the next 12 months?
Comparing the next 12 months with the last 12 months, what do you believe the outlook for your organisation will be in terms of:
You said that you planned to keep the level of investment the same, or reduce it, in the next 12 months. Would any of the following cause you to decide to increase investment instead?
Which of the following factors, if any, are having a negative impact on your organisation?
What do you think the annual rate of inflation will be by the end of next year? That is, by the end of 2022.