Business confidence and recruitment expectations dropped in June after previous gains, according to the Institute of Directors.
The IoD’s economic confidence index showed that headcount expectations fell to -10 in June from -1 in May, while overall optimism fell to -53, having risen to -35 in May.
The index measures the net proportion of positive or negative answers from members of the business body on the question of how optimistic they are about the UK economy in the coming 12 months. Although wage expectations were positive, at +40, this was down from +45 in May.
Almost half of respondents (48%) thought there would be no change in their headcount over the next 12 months compared to the last year, but almost 30% thought it would be “somewhat lower” or “much lower”.
Business confidence
Almost a fifth said their workforce would grow, with 17.6% saying it would be “somewhat higher”, and 1.8% “much higher”.
Around half of respondents thought wages would be either “somewhat higher” or “much higher”.
However, 41.9% of leaders said they were “quite pessimistic” about the UK economy over the next 12 months, and 23.6% said they were “very pessimistic”.
Anna Leach, chief economist at the IoD, said it was disappointing to see business leaders’ confidence dropping back in June.
“The IoD’s confidence measure has now lost about half the gains made since November,” she said.
“Headcount and investment intentions also deteriorated, with headcount expectations weakening most.
“Business leaders are finding economic conditions increasingly challenging, both as Autumn Budget tax measures take effect – particularly changes to national insurance, business and agricultural property relief – and from ever increasing global uncertainty.”
Leach welcomed the government’s recent industrial strategy announcements but added that “the message coming through is that the tax increases unleashed on business have already undermined the industrial strategy’s ambition ‘to make the UK the best country to invest anywhere in the world’”.
“The reality is that the government has been much more radical in taxing business than it has been in removing blockers to growth.
“We need to see faster progress and greater ambition on deregulation – particularly planning reform – and a reconsideration of the tax landscape for business if we’re to change the UK’s economic fortunes.”
The IoD has been vocal about the reforms outlined in the Employment Rights Bill, for which a roadmap was published yesterday.
Earlier this month, it published research showing that 72% of business leaders believe the Bill will have a negative impact on UK economic growth.
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