Business Optimism falls for the fourth consecutive month
The IOD Directors confidence index has now hit the lowest point since Lockdown
The latest report from the Institute of Directors is out, and the findings show 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.
With that, key headlines include:
- Business leader confidence in their own organisations has fallen from +2 in October to -7 in November, the lowest since May 2020 (-8).
- 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).
Just as importantly, the study has 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, where 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
The last time the UK had rising unemployment and inflation (which is the inevitable consequence of 44% increasing prices and 43% reducing employment) was in the 1970s and led to the collapse of the Labour Government of the time, as the IMF ended up being needed to prevent the UK economy from collapse.
While it is unlikely anything as dramatic would happen this time, within the first few months of this new Government, direct investment into the UK has slowed down, capital flight has accelerated and now employers are tightening their belts too. The real question therefore, is how long will Rachel Reeves have to prove her strategy, before the markets force her to change direction? And in the meantime, is a recession now inevitable?
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The data referenced above has been sourced from Vacancy Analytics, a cutting-edge Business Intelligence tool that tracks recruitment industry trends and identifies emerging hotspots. With 17 years of experience, we have a deep understanding of market activities in the UK and globally.
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