IoD press release  Business confidence remains subdued as cost pressures intensify

Business leader confidence in their own organisations also fell, to -2 in July from +7.

The majority of the underlying indicators also declined:

• Revenue expectations fell to +9 from +11 – the lowest reading in 2026.
• Headcount expectations fell to -7 from -3.
• Investment intentions fell to -13 from -4.
• Export expectations fell to +3 from +7.
• Cost expectations remained unchanged at +83.

Anna Leach, Chief Economist at the Institute of Directors, said:

“Our latest data signals a further modest deterioration in sentiment and trading conditions in July. Overall confidence in the economy has drifted down a little further amongst business leaders, continuing its trend of weakness and volatility since the 2024 Budget. Meanwhile revenue expectations have dropped to their weakest level in 2026, and alongside elevated costs, means the squeeze on margins has intensified. Business leaders report that consumer spending is under pressure from weak sentiment and price pressures, while demand generally remains cautious. Businesses also note that policy uncertainty has worsened as the UK undergoes a further change in political leadership. Looking toward the Autumn, there’s a risk that cost pressures rise further in light of renewed conflict in the Middle East, reinforcing the squeeze on households and businesses.

“Driving a meaningful and sustainable improvement in growth must remain the government’s priority. Many policies are moving in the right direction – including devolution and planning reform. In these areas, the issue is speed, breadth and consistency of action. But in other areas, more work is needed. The key asks from business are that we move away from constant speculation on tax – particularly those taxes that affect the investment environment in the UK – and that the government continues to work with business to ensure that the Employment Rights Act delivers for the economy.”

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’.

Full Results

555 responses from across the UK, conducted between 10-29 July.13% ran large businesses (250+ people), 18% medium (50-249), 26% small (10-49 people), 29% micro (2-9 people) and 14% 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?

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