IoD press release Confidence levels approach Covid lows amongst business leaders

This brings business confidence in the wider UK economy to close to its record low, in April 2020 (-69) at the onset of the Covid pandemic, and marks the second lowest reading of the Index since it began in July 2016.

Business leader confidence in their own organisations also fell from +2 in October to -7 in November, the lowest since May 2020 (-8).

This drop in confidence is also reflected in the underlying indicators:

• Investment intentions fell to -27, down from -15 in October, the lowest reading since May 2020 (-43).
• Headcount expectations continued to decline, reaching -24 in November, from -4 in October, the lowest point since May 2020 (-33).
• Export intentions declined to +2 in November, from +6 in October – the lowest reading of this indicator since its introduction in April 2023.
• Revenue expectations fell to +4 in November from +15 in October, the lowest reading since October 2020 (-8).
• Wage expectations dropped to +21 from +47 in October, its lowest reading since November 2020 (+19).

We also asked business leaders how they were expecting to be affected by and responding to the changes in employer National Insurance:

• 83% of respondents expect their employer NI bills to increase. Of those:
  • 50% expect to lessen wage increases
  • 44% expect to increase prices
  • 43% to reduce employment
  • 25% expect to absorb the costs in lower margins
  • 25% will seek to increase productivity
  • 57% were planning to do at least two of the above

Looking at the quarterly assessment of factors having a negative impact on business leaders’ organisations:

• UK economic conditions were the most significant concern for members, as they were in August, but the degree of concern has risen: 73% felt that economic conditions were having a negative impact on their organisation in November 2024, up from 56% in August.
• Employment tax has replaced skills and/or labour shortages as the second biggest concern, cited by 67% of members, almost double the proportion in August (34%)
• Although business tax remains in third place, in November the proportion of members citing this as having a significant negative impact has jumped to 51% from 41% in August.

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

“This is a sobering set of results. As businesses continue to absorb the consequences of the Budget for their business plans, confidence has continued to plummet and is approaching the lows reached at the onset of the Covid pandemic. Far from fixing the foundations, the Budget has undermined them, damaging the private sector’s ability to invest in their businesses and their workforces.

“The clash between government intentions to address inactivity and the sharpness of the increase in employment costs is jarring. Likewise welcome attempts to improve the environment for investment in the UK sit at palpable odds with a significant hit to profits which will undermine private sector investment. There’s now a significant risk of growth stalling across the private sector due to the extent of the reset required by business. There is particular concern being expressed by the social care and charities sectors, who feel they have no option but to reduce the services that they offer to vulnerable sections of the community. The broader SME community, as well as family businesses, feel likewise especially exposed to multiple overlapping changes in the tax system.

“We recognise the need to fix the public finances, but we are concerned that the extent of the hit to the private sector, in combination with how inheritance tax and business property relief reforms are impacting certain types of businesses, will serve to undermine growth and ultimately the public finances too. We retain concerns regarding the forthcoming changes to employment regulations, which will substantially increase costs for business. We urge the government to look for opportunities to ameliorate the negative impacts of the Budget and other policy measures, so that businesses are able to deliver the jobs and investment needed. The flurry of announcements expected in the Spring – spanning industrial strategy, infrastructure and tax reform – will be an important opportunity to reposition the growth narrative more positively.”

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

601 responses from across the UK, conducted between 15-27 November 2024. 14% ran large businesses (250+ people), 20% medium (50-249), 26% small (10-49 people), 30% micro (2-9 people) and 11% 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:

Will the announced changes to employer National Insurance in the Autumn Budget increase or reduce your employer National Insurance bill?

You said the changes will increase your employer National Insurance bill. How do you plan to respond to the resulting higher costs of employment?

Which of the following, if any, are having a negative impact on your organisation?