Business confidence in the UK has plunged to its lowest point since the early stages of the pandemic, according to a leading survey, following Chancellor Rachel Reeves's recent Budget statement.
Key Metrics Hit Five-Year Lows
The Institute of Directors' (IoD) monthly survey indicated a severe drop in sentiment among business leaders after last Wednesday's fiscal event. The key metric measuring confidence in their own organisations' growth prospects fell sharply to -20, down from -5 in a pre-Budget poll. This represents the second-lowest reading since April 2020, a month after the first national lockdown began.
Overall confidence in the UK economy remained deeply negative, inching up by just one point from -73 to -72 in a snap poll taken after the statement. The data provides a damning assessment, coming after the Office for Budget Responsibility (OBR) stated that none of the growth-focused policies announced would actually boost economic output.
Investment and Hiring Intentions Weaken
The IoD's research painted a bleak picture for future business activity. Revenue expectations fell into negative territory at -8, the lowest level since September 2020. More alarmingly, the net balance for investment intentions dropped to -39, marking the second-lowest reading on record after May 2020.
Headcount expectations also fell sharply to -29, nearing levels witnessed during the height of the pandemic. This will concern Labour officials, who have placed growing the economy at the heart of their government's mission. The Budget, focused on living costs and borrowing, failed to ease cost expectations significantly, with the relevant net balance remaining high at 82.
"Work Remains to Be Done" on Growth
Anna Leach, chief economist at the IoD, said the negative reaction from four in five business leaders meant it was "no surprise" confidence metrics stayed near record lows. "The message from this Budget is that work remains to be done to lift the UK’s growth prospects," Leach stated. "The immediate outlook for business investment and employment has weakened further, and that will require further attention."
Firms identified employment taxes, business taxes, and the UK's poor economic conditions as the top three factors hampering their activity. This gloomy sentiment was echoed elsewhere, as the Lloyds Bank Business Barometer also showed hiring intentions and trading prospects dropping in November, though its readings remained above long-term averages.
