Director Weekly A missed opportunity to boost confidence
The IoD’s latest research shows business optimism remains at historically depressed levels – and this week saw the government miss a key opportunity to show that it’s listening to business
March began with the release of more dismal numbers from the IoD Director’s Economic Confidence Index, which measures business leader optimism in the prospects for the UK economy.
The Index dropped back to -64 in February 2025, from -59 in January. That’s only just above the recent nadir of -65 in November 2024, and close to the low point reached during the first Covid lockdown five years ago.
The state of the UK economy remains the most significant concern: 73% of directors feel that economic conditions were having a negative impact on their organisation, the same proportion as in November.
Events over the past week suggest that the global economy is unlikely to provide much relief. President Trump’s disorienting geopolitical shifts and trade tariffs are bound to be unsettling for many UK businesses, even if the UK is not directly targeted.
Such developments are also likely to weaken consumer confidence – which is a pity, because UK consumers are sitting on substantial savings. A moderate improvement in consumer spending could generate a welcome economic uptick, yet it’s hard to see that materialising in the current climate.
Of course, employers are also concerned about the policy environment. Our survey found that employment taxes and business taxes remain the second and third largest concerns, cited by 64% and 50% of leaders respectively. Compliance with government regulations (33%) and skills/labour shortages (31%) are once again the next most significant concerns.
Employment Rights Bill amendments
Against that gloomy backdrop, it might be hoped that the government would seize every opportunity to bolster business confidence. This week’s amendments to the Employment Rights Bill were a golden chance to do just that.
Unfortunately, it has been a missed opportunity. The government has not heeded many of businesses’ concerns – and in some regards, employers will feel the government is going in the wrong direction.
The IoD has been calling on the government to make four changes to its planned reforms:
- Amend the planned introduction of additional protections against unfair dismissal so that they only come into effect after six months of employment, rather than on day one
- Increase the planned reference period for the entitlement to guaranteed hours to 52 weeks, and make it a right for employees to request, rather than to be proactively offered, a contract reflecting hours regularly worked
- Retain one waiting day before employees can access Statutory Sick Pay
- Retain existing thresholds for statutory recognition of trade unions.
Urgent and substantive action is needed from government to help restore business confidence. This week represents a missed opportunity.
Find out more about the latest findings from the IoD Directors’ Economic Confidence Index here.
About the author
Dr. Roger Barker is Director of Policy and Governance at the Institute of Directors, and a member of the Management Board. Dr. Barker is the author of numerous books and articles on corporate governance and board effectiveness, including the recent volume: ‘The Law and Governance of Decentralised Business Models: Between Hierarchies and Markets’ (Routledge, 2020). He is a former member of the European Economic and Social Committee and the founder of a successful corporate governance advisory company. A former investment banker, Dr. Barker spent almost 15 years in a variety of equity research and senior management roles at UBS and Bank Vontobel, both in the UK and Switzerland. He has a doctorate from Oxford University and taught politics at Merton College, Oxford (2005-2008).
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