The government’s plans for the economy have “snuffed out confidence” among business leaders ahead of the Chancellor’s Autumn Budget next month.
The Institute of Directors (IoD)Economic Confidence Index optimism in business confidence for the economy has fallen which in part has been blamed on investment intentions.
The most significant factors which has impacted businesses is labour shortages and the economic conditions.
The fifth largest concern businesses leaders have is employment taxes as Rachel Reeves will deliver her first budget on 30 October.
This reduction in confidence is also borne out in the underlying indicators:
- Business investment intentions for the year ahead dropped 14 points, from +24 in July to +10 in August – the sharpest decline since the beginning of the pandemic lockdowns
- Headcount expectations also dropped 14 points, from +24 to +10 – this was likewise the sharpest fall since the first pandemic lockdown
- Revenue expectations fell from +36 to +28 and cost expectations increased from +81 to +83
- Export expectations fell from +12 to +8 – the lowest since June 2023 (+8)
- Wage expectation also fell from +59 to +56.
Looking at the quarterly assessment of factors having a negative impact on business leaders’ organisations:
- UK economic conditions (56%) and Skills/labour shortages (43%) continue to be the most significant factors.
- Business taxes has risen to third place (41%, up from 33% in May), replacing Compliance with government regulation (37%).
- Employment taxes are now fifth highest, up from eighth in May (25% to 34%).
- Global economic conditions has fallen to eighth place, after being third in May (33% to 26%).
Anna Leach, Chief Economist at the Institute of Directors said, “It’s disappointing to see last month’s welcome uptick in business leader confidence snuffed out over the summer.
It is notable that the sharpest drops in our economic measures are in investment and headcount expectations, whilst other measures have moved to a lesser degree, albeit in a likewise negative direction.
“The newsflow in recent weeks on employment rights and Autumn tax rises has dented confidence in the environment for business in the UK.
“As we head into a busy Autumn, we are calling on the Government to take time to get policy design right for the long-term and deliver the stable tax and policy framework needed to drive business confidence and investment.
“Further clarity on the industrial strategy and the business tax roadmap, in conjunction with more progress in engaging with business on workers’ rights, would be welcome.”
