Business confidence at highest level since Budget

Despite the global uncertainty about trade and UK concerns over the cost of last October’s budget and employment rights reform, businesses are more optimistic than they have been since September 2024.

The Institute of Directors’ Economic Confidence Index grew for the second consecutive month, rising from -58 to -51 by April 2025 – its highest level since September 2024.

The confidence of business leaders in their own organizations also increased from +5 to +13. In April, the majority of underlying indicators showed a modest increase.

The second consecutive month, headcount expectations rose from -4 (to +3). This is the first positive reading in September 2024 (+6). However, they are still down significantly on last year (+20). Wage expectations, however, fell from +49 (+57 in April 2024) to +43 (a slight drop).

The investment intentions of the public rose from -8 in March to -5 in April, but also remained down sharply on a year-on-year basis (+21 by April 2024).

The cost expectations fell for the second consecutive month from +87 down to +83. However, they remained higher than the previous year (+76 by April 2024).

Export expectations increased from +5 (+5) to +8 (+14 by April 2024).

Anna Leach is the chief economist of the Institute of Directors. She said that President Trump’s delay in implementing tariffs was partly responsible for renewed optimism. She stated: “The IoD headline confidence measure has reached its highest level since the Budget. Investment, headcount, and cost expectations have all improved for the second month in a row.” Most prominent were the uncertainties arising from US Tariff Policy, which slows down and scales down contracts. Also, there was a sharp increase in costs after last year’s Budget.

She said that there is a “strong feeling of frustration” among business leaders because the government has raised their costs quickly, but been slow to implement policies to help them grow their businesses. It is good that the government focuses on efficiency in the public sector, but it must also improve policy delivery and deliver value for money. Businesses would like to see faster progress in the deregulation drive, as well as action to address other barriers for growth such as energy and employment costs. This would allow them to grow and invest.

Kate Shoesmith is the deputy chief executive of the Recruitment and Employment Confederation. She believes that in order to maintain optimism, it was necessary to take rapid action regarding skills shortages. She stated: “Rising expectations for exports, investment and headcount indicate a long-awaited recovery, hinting that the economy will finally emerge from the woods by 2025.” However, deep-rooted issues such as rising costs, a softer outlook for revenue and wages, and long-term problems like skills shortages or poor infrastructure still require urgent government action. This recovery must be the catalyst for a larger, sustained effort to fix structural flaws in the economy.

The IoD results were different from the Bank of Scotland’s latest Business Barometer. The barometer showed that the confidence level was higher at the start of the year than it was in April.

BoS reported that firms’ confidence in their own trading prospects fell seven points, to 50%. Their confidence in the economy as a whole dropped 13 points, to 28%.

North-east England ranked as the most confident region or nation in the UK for April (59%), followed closely by the West Midlands (53%), and the North-West (52%).

Hann-Ju Hu, senior economist, Lloyds Commercial Banking said: “With US tariffs announced on April 2 and the subsequent market volatility, it’s not surprising that business confidence has seen an impact in this month.

“However the economic optimism is higher than it was at the start of the year. This shows businesses’ resilience to recent challenges. Overall confidence remains well above the average long-term of 29%. An average taken over the past 20 years.”

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