Business confidence in the UK experienced a sharp drop in June 2023, according to the Institute of Directors’ (IoD) latest Economic Confidence Index.
The index, which tracks optimism about the prospects for the UK economy among business leaders, plunged to -31 in June, down from -6 in May. This has effectively erased the improvements seen since the start of the year.
According to the report, the primary factors driving this drop in confidence were increasing worries about inflation and a decline in customer demand within the UK. Of the business leaders who expressed pessimism about the UK economy in June:
- 33% identified ‘the rate of inflation in the UK’ as their main concern, up from 26% in January
- 19% pointed to ‘falling customer demand in the UK’ as their key issue, up from 11% in January
Additionally, the index measuring optimism about their own companies among business leaders also fell from +44 in May to +29 in June.
Businesses appear to be more reluctant to commit to investments, with net investment intentions dropping from +22 in May to +11 in June.
Kitty Ussher, chief economist at the Institute of Directors, said: “The surge in optimism and investment plans that we’ve witnessed in recent months came to a shuddering halt in June as business leaders took stock of worse-than-expected inflation data and what that means for interest rates and prospects for the economy overall.”
Ussher went on to explain that many investment plans, which were only recently revived, are now being put on hold again as business leaders evaluate whether the current business environment is too risky for expansion.
