Hiring freezes loom as business confidence remains near record low
British business leaders are bracing for hiring freezes as headcount expectations dropped into negative territory again, according to new data from the Institute of Directors.
The IoD’s economic confidence Index edged up to -64 in April from -76 in March, remaining close to historic lows.
But headcount expectations slipped to minus three from zero in the previous month, signalling that more firms now plan to cut staff than expand their workforce.
The figures suggest the labour market recovery could stall, with the IoD’s chief economist Anna Leach warning that firms could impose “hiring freezes” as they deal with the uncertain cost rises from the Iran war.
Revenue expectations nudged up to +17 from +13, and investment intentions improved slightly to -9 from -13. They have remained in negative territory every month since August 2024.
Cost pressures also eased marginally, falling to +85 from +88, though they remain elevated.
Hiring freeze to rattle Treasury
An extended freeze on hiring will weaken morale among Brits, with official figures suggesting vacancies had fallen to a five-year low.
The Lloyds Bank business barometer found that around one in five firms (17 per cent) expected to reduce staffing levels. More than half of respondents in the separate survey, however, suggested their headcount could increase.
The business confidence survey, which has regularly been cited by Labour ministers, showed that business confidence fell though output could be stronger in the upcoming year.
The latest set of surveys will barely lift spirits in the Treasury, where economists and researchers are scrambling to understand the full implications of potential fuel shortages and spikes in inflation.
The government has held a string of emergency Cobra meetings to discuss the policy response to the Iran war.
On Thursday, Bank of England governor Andrew Bailey revealed that he warned government officials about second round effects, whereby wage growth pressures could trigger another surge in inflation.
One in five business leaders in the survey of around 250 respondents said their organisations had already experienced shortages linked to the Middle East conflict, with a third of those describing them as significant.
Fuel and energy shortages were the most commonly cited, affecting 55 per cent of those hit. Meanwhile, more than half of all respondents said they were worried about shortages in the months ahead.
Leach acknowledged a “small improvement” in April’s outlook but cautioned that gains were coming “from very low bases.”
She pointed to targeted investment resuming in areas such as AI and renewables, but said cost pressures, weak demand and regulatory burdens continued to weigh heavily on sentiment.
“There must be an honest recognition that the UK will remain reliant on fossil fuels for many years to come, even while we push hard for the important shift to renewables,” Leach said.
“It makes sense to exploit and monetise our own resources, for the UK’s economic security.”