Business leader optimism remains at nine-year low despite end of year lift in 2024
A new report from the Institute of Directors (IoD) has shown that business leader optimism in the UK economy crept up towards the end of 2024, but still remains at a nine-year low.
The IoD Directors’ Economic Confidence Index measures the net percentage of positive answers from members of the Institute of Directors to the question: “How optimistic are you about the wider UK economy over the next 12 months?”.
The Index crept up to -61 in December 2024 from -65 in November. Though the figures show improvement, this represents the fourth lowest reading of the index since its introduction in July 2016.
Business leaders' confidence in their own organisations also rose to +8 in December, from -7 in November. However, this is still the second lowest reading of this indicator since June 2020.
Anna Leach, chief economist at the Institute of Directors, said: “IoD members remained cautious on the outlook for the year ahead when we surveyed them over the festive period. Although it was positive to see improvements in all our forward-looking economic measures, they remain substantially below the averages for the first half of 2024.
“It is welcome to hear of government commitments to stable and long-term policy making that facilitates business planning and investment. But it takes more than stability to deliver growth and government rhetoric on investment is increasingly out-of-step with business reality.
“Our data shows that business leaders are proceeding with investment in areas such as technology, workforce training and research and development. But profit uncertainty is the greatest constraint they cite and almost a quarter of business leaders are planning to make no investments this year.”
The stats come alongside a new report from the Recruitment and Employment Confederation which highlights how employers are urging the government to follow through on its commitment to focus on workforce issues in its new industrial strategy.
Invest 2035 is the government’s 10-year plan for the economy. A consultation period will inform a final industrial strategy in spring 2025 and the Advisory Council for the strategy has now begun meeting.
When asked which areas the Government should prioritise to meet the skills challenge, 57 per cent of employers said upskilling the existing workforce should be central, while 41 per cent said they wanted to see vocational training routes expanded.
The government has said people and skills is central to the industrial strategy’s task to grow the economy.
Neil Carberry, REC Chief Executive, said: “If the new industrial strategy’s focus on people is just a list of skills programmes that government will fund, then it will fail. Skills are part of a complex web of workforce practices that – if we can get things right – have the potential to transform UK productivity."