Director Weekly Is the UK economy turning a corner?

The quarterly meeting of the IoD Policy Ambassadors this week was a chance to take the pulse of members around the UK on the current business environment and the policy landscape. Here are three takeaways from the discussion.

Business confidence could be turning the corner

There was some feeling that the business outlook is improving – though leaders remain deeply cautious, given the global and domestic risks that prevail.

Those views chimed with the latest data from the IoD Directors’ Economic Confidence Index, which rose from -59 in March to -51 in April, the highest number since before the 2024 Budget.

While employers are feeling the pain of the National Insurance and National Minimum Wage increases – and remain concerned about planned employment law reforms – our research also shows that headcount expectations improved for the second month running, from -4 to +3.

The sense that the economy may have turned a corner is reinforced by ONS data revealing better-than-expected 0.5% growth in February. Of course, that predates the US tariff announcements, which could set growth back significantly.

Yet in the 48 hours after the Ambassadors met, two significant trade developments have emerged. Reports of a trade deal with the US could give exporters a huge boost – while the UK-India Trade Deal completed this week is also a win for the UK. Sectors including whisky, automotive and aerospace should benefit from easier access to India’s fast-growing markets.

The Policy Ambassadors also reflected on the importance of the government reaching agreement with the EU on key areas including recognition of professional qualifications, veterinary regulations, and some form of youth mobility arrangement.

Local elections shake up the political picture

Another intriguing point of discussion was the impact of last week’s local elections in England. The big story, of course, is the rise of Reform UK, which took control of 10 councils and won two mayorships.

As familiar as party leader Nigel Farage may be, Reform is an unknown quantity in local government. Praising Elon Musk’s cost-cutting efforts in the US, Farage has said he wants to see “a DOGE in every county” and promised to give to “reduce excessive expenditure.” Many businesses will be seeking answers from those Reform-led councils about their plans, and assessing the potential impact of new policies.

3. SMEs will benefit from Commission on Non-executive Directors

The Policy Ambassadors were very supportive of the IoD’s recently-launched Commission on NEDs and highlighted the need to improve how SMEs, in particular, use NEDs.

While large companies systematically assess board composition to identify skills gaps and guide NED appointments, SMEs tend to work on the basis of who they know. That means they tend not to have the broadest possible set of perspectives around the table

– which can leave boards liable to groupthink, and may expose the business to unidentified risks. Recommendations to help SMEs appoint NEDs in a more systematic way will be welcomed.

As ever, the meeting was a valuable chance to understand how IoD members are being affected by national and local policy. It will inform our ongoing work with policymakers over the coming weeks.

Read more on the latest findings from the IoD Directors’ Economic Confidence Index here.