Business confidence drops to post-pandemic lows after Budget
Business confidence in bosses’ own organisations fell to the lowest level in over five-and-a-half years after the Budget, a leading survey has suggested, as the absence of growth policies in Rachel Reeves’ statement dampened leaders’ moods.
The Institute of Directors’ monthly survey indicated bosses were fearing for the worst after last Wednesday’s much-anticipated event, with key metrics about businesses’ performances dropping to five-year lows.
After the Budget was delivered, business confidence in organisations’ own growth sharply dropped to -20 from -5 in a survey held before the statement.
This was the second-lowest reading since April 2020, a month into the first lockdown.
The set of data gathered after last Wednesday provides another damning assessment of Reeves’ Budget after the Office for Budget Responsibility (OBR) said none of the growth-focused policies in the statement would boost output.
Growth predictions were also downgraded across the entire forecast period, which is likely to keep businesses on edge about their prospects.
In its headline metric, overall business confidence about the UK economy in a snap poll after the Budget barely changed, inching up by one point from -73 to -72, demonstrating the sense of peril directors are left in.
Budget fails to ease cost expectations
IoD researchers also showed that revenue expectations fell into negative territory at -8, which was the lowest reading since September 2020 while the net balance for investment intentions dropped to -39, the second lowest reading on record after May 2020.
Headcount expectations falling to -29, near levels seen during the pandemic, could also alarm Labour officials given they have made growing the UK economy their central mission in government.
The Budget statement, which was focused on curbing the cost of living and setting the conditions for lower borrowing costs, failed to dramatically ease cost expectations as the net balance reading remained high at 82.
Firms said employment taxes and business taxes were among the top three factors hampering activity, with the UK’s poor economic conditions topping the list.
Anna Leach, chief economist at the IoD, said the fact that four in five business leaders viewed the Budget negatively meant it was “no surprise” that confidence metrics remained at near-record lows.
“The message from this Budget is that work remains to be done to lift the UK’s growth prospects,” Leach said.
“The immediate outlook for business investment and employment has weakened further, and that will require further attention.”
At the end of last week, the Lloyds Bank business barometer, which has tended to offer more sympathetic readings of business confidence, showed hiring intentions and trading prospects among organisations dropping in November.
Its survey said business confidence had dropped over the course of the month, though it remained above long-term averages.