Business confidence has risen to its highest level since the 2024 Budget, but remains gloomy, according to the Institute of Directors’ monthly benchmark.
Business leaders were much more likely to be positive about their own organisation’s prospects than they were about the wider UK economy.
The IoD’s Directors’ Economic Confidence Index found that business leaders’ confidence in their own organisations rose to +1 in August 2025, up from -9 in July. The outlook remains ominous for the UK economy, although the index grew to -61 in August, up from -72 in July. More than 600 IoD members took part in the research.
The August reading returns the index to levels seen immediately after last year’s Budget, having dropped to its worst reading on record in July.
This improvement is reflected in the underlying indicators: investment intentions rose to -8 in August, from -27 in July; headcount expectations rose to -4, from -23; while wage expectations dropped to +42, from +65. Revenue expectations rose to +12, from -8.
UK economic conditions (76%) remained the most significant negative concern for businesses, up from 67% in May 2025. Concerns about employment taxes remained at 59%.
Finally, business leaders indicated that the regulations that posed the biggest blockers to growth for their organisation were employment and workplace regulations (45%), and trade and customs requirements (17%).
Anna Leach, chief economist at the Institute of Directors, said: “Business leader confidence has picked up slightly from July’s record low, but only to levels seen after the 2024 Budget and during the early pandemic.
“Hiring and investment expectations continue to swing back and forth as April’s tax rises ripple through the economy, while cost pressures remain stubbornly high. It comes as little surprise to see taxes and the wider economic climate dominating concerns amongst business leaders.”
Business confidence
Jobs market continued to struggle during July
“As we head towards another challenging Budget, the government should seize the chance to unlock growth through smarter deregulation. Leaders tell us the biggest barriers they face are in employment and trade.
“Here lies the tension in the government’s growth agenda: while trade policy has focused on reducing frictions and opening opportunities, its employment policies risk moving in the opposite direction.
“Higher costs and rising regulatory risks threaten to undermine ambitions for jobs and growth. Meanwhile, ongoing tax rumours further damage confidence. We urge the government to unleash a more coherent and consistent economic plan for the UK, focused on easing the cost of doing business.”
The IoD Directors’ Economic Confidence Index measures the percentage of net positive answers from its members on a five-point scale from ‘very optimistic’ to ‘very pessimistic’.
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