Business organisations the Confederation of British Industry and the Institute of Directors have produced contrasting forecast indicators for the UK economy based on new research.
Although both organisations have spotted similar results to their surveys – such as a rise in fears over geopolitical tensions and cybersecurity – each has struck a very different tone, with the IoD highlighting a “recovery in business confidence”, while the CBI found “little sign of summer cheer.”
The IoD Directors’ Economic Confidence Index, which measures business leader optimism in prospects for the UK economy, jumped to -35 in May 2025 from -51 in April – the highest leap that the Index has seen since August 2024 (-12).
Meanwhile, according to the CBI’s latest Growth Indicator, private sector firms once again expected activity to fall in the three months to August (with a weighted balance of -30%). Expectations have deteriorated further and are now at their weakest since September 2022.
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The CBI said business volumes in the services sector were expected to decline (-32%), with expectations at their weakest since November 2022. The anticipated fall was driven by predictions of decline in business and professional services (-29%) and consumer services (-43%) volumes.
Distribution sales were also expected to fall in the three months to August (-39%, also the weakest expectations since September 2022), alongside manufacturing output (-14%).
The negative outlook comes as private sector activity fell again in the three months to May (-26%, from -19% in April). The decline in activity was broad-based across all sectors.
However, according to the IoD, business leaders’ confidence in their own organisations rose slightly from +13 to +15, with investment intentions rising from -5 in April to 0 in May. Revenue, export and wage expectations all rose significantly while headcount expectations fell and cost expectations remained static.
The top three factors having a negative impact on organisations remained the same as February 2025 but each showed a decline: UK economic conditions (67%, down from 73% in February), employment taxes (59%, down from 64%) and business taxes (45%, down from 50%).
However, global economic conditions jumped into fourth position (41%, up from 29%). Geopolitical and cybersecurity risks also rose markedly.
Anna Leach, chief economist at the Institute of Directors, said: “It’s good to see a recovery in business confidence underway, with our headline measure moving up three months in a row to its highest since August 2024. Looking at our underlying indicators, while investment intentions have also returned to last summer’s levels, headcount expectations have dropped again and remain notably down.
“Meanwhile, businesses are more concerned about a global economic slowdown, as well as cybersecurity risks following a number of high-profile attacks on retailers. Business leaders tell us that while they see some key growth opportunities for the UK in the coming year in areas such as energy innovation, defence, construction and through a closer relationship with the EU, much hinges on the government delivering a coherent, business-friendly policy environment.
Alpesh Paleja, deputy chief economist at the CBI, however, found “little sign of summer cheer in our surveys”, with firms highlighting numerous headwinds such as the continued impact of higher employer national insurance contributions and the national living wage hike on their costs and operations and uncertainty from developments in the global trade landscape; compounded by a general sense of weak demand at home.
He added: “Against this backdrop of uncertainty, private sector firms are looking to the government for decisive action to restore business confidence and boost growth. With the Spending Review and Industrial Strategy less than two weeks away, the government has a critical opportunity to drive innovation, investment and sustainable economic growth.”
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