
IoD press release Business costs need to be addressed to truly lift business confidence
The IoD Directors’ Economic Confidence Index, which measures business leader optimism in prospects for the UK economy, edged up to -59 in January 2025 from -61 in December. However, confidence still remains at historically depressed levels.
Business leader confidence in their own organisations declined to +6 in January, from +8 in December.
There was also a drop in some of the underlying indicators:
- Investment intentions fell from 0 in December to -14 in January.
- Headcount expectations dropped from -1 to -9.
- Revenue expectations fell from +19 to +13.
Other indicators – costs, wages and export expectations – remained broadly consistent with their levels from the previous month.
When asked what measures would do the most to boost business confidence in 2025, 58% of business leaders selected a reduction of the tax burden on business, with 41% selecting a significant scaling-back of the government’s employment law reforms, and 35% selecting an improved trade deal with the EU.
Anna Leach, Chief Economist at the Institute of Directors, said:
“Confidence has ticked up for the second month in a row in January, but nonetheless remains close to its Covid lows. In a recent poll of our members, 58% felt that a reduction in the tax burden on business would be the most effective way of lifting business confidence, with 41% looking for employment regulations to be scaled back and 35% looking for a better trade deal with the EU – a better articulation of the growth narrative was in sixth place supported by 23% of respondents.
“The recent shift in the government’s rhetoric to emphasise growth is very welcome. The focus on unblocking planning constraints and the delivery of major infrastructure investments that will enhance transport capacity and drive innovation are the right ones. But it is clear that companies continue to be challenged by the breadth and scale of cost increases announced at the Budget, and this risks undermining both the investment needed to drive growth and the sustainability of the public finances. We urge the Chancellor to seek opportunities to ease these significant pressures on business and welcome recent signals that areas such as the taxation of non-doms and the scope of employment regulations will be re-considered.”
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
687 responses from across the UK, conducted between 13-30 January 2025. 15% ran large businesses (250+ people), 19% medium (50-249), 22% 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?
Comparing the next 12 months with the last 12 months, what do you believe the outlook for your organisation will be in terms of:
At the start of 2025, business confidence in UK economic prospects stands at historically depressed levels. Which of the following would do most to boost business confidence in 2025? Please choose up to three.
