Drop in confidence among business leaders impacts on headcount

According to the Institute of Directors, business confidence and expectations for recruitment fell in June following previous gains.

The IoD’s economic confidence indicator showed that expectations for headcount fell from -1 to -10 in the month of June, and overall optimism dropped to -53 after rising to a -35 level in May.

The index is a measure of the net percentage of positive or neutral responses from the members of the business group to the question about their optimism for the UK economy over the next 12 months. The positive outlook for wages, which was +40 in May, has decreased to +40.

Nearly half (48%) of respondents thought that their headcount would remain the same over the next year compared to last year. However, almost 30% believed it would “somewhat” or “much” lower.

Nearly a fifth of respondents said that their workforce will grow. 17.6% stated it would “be somewhat higher” and 1.8% said “much more”.

Around half of respondents believed that wages would either be “somewhat” higher or “much” higher.

41.9% said that they are “quite pessimistic”, and 23.6% were “very pessimistic”, about the UK’s economy in the coming 12 months.

Anna Leach is chief economist of the IoD and said that it was disappointing to watch business confidence drop in June.

She said that the IoD confidence measure had lost half of its gains since November.

“Investment and headcount intentions have also declined, with expectations for increased headcount being the most weakened.

Business leaders find the economic climate challenging as Autumn Budget tax changes take effect, notably changes to national insurance and business and agricultural property exemptions, and due to ever-increasing global uncertainty.

Leach welcomed recent Industrial Strategy announcements by the government, but said that “the message is coming through that the tax hikes unleashed upon business have already undermined industrial strategy’s aim to make the UK the most attractive country in the world for investment”.

“The government has taxed businesses much more aggressively than they have removed barriers to growth.

We need to make faster progress, and be more ambitious in deregulating – especially planning reform – and reconsidering the tax landscape for businesses if we want to change the UK’s economic fortunes.

Yesterday, the Roadmap for the Employment Rights Bill was published. The IoD is vocal about reforms in this bill.

It published Research earlier this month showing that 72% business leaders think the Bill will negatively impact UK economic growth.

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