Confidence among British business leaders has been knocked by Theresa May’s resignation and uncertainty over who will succeed her as prime minister, according to a survey.
Firms became more pessimistic about the economic outlook, with a key confidence measure falling to a six-month low of -28% in early June from -19% in April in a survey by the Institute of Directors. The figure reflects a net balance of firms saying the economy would improve minus those expecting a deterioration. The findings are based on a poll of 900 company directors carried out between 22 May and 5 June. May announced her resignation on 24 May.
The drop reversed a trend of improving confidence since the turn of the year. Firms’ outlook for the economy hit a nadir of -38% in December, according to the IoD’s confidence tracker. The measure has been negative for 12 months in a row.
A balance of 27% of firms believed their own prospects also worsened compared with 34% in April. Their expectations for future investment and employment remained weak, with readings of 7% and 16% respectively.
All regions reported pessimism about the economic outlook for the 12 months ahead, with London (-31%), the south west (-32%), West Midlands (-42%) and Scotland (-54%) notably more negative than the UK figure. Northern Ireland was the least pessimistic, at -7%.
Tej Parikh, the chief economist at the Institute of Directors, said: “Dealing with political uncertainty is part and parcel of leading a business, but this has been taken to extremes over recent years. With the nature of Brexit still ambiguous and another shakeup of key government personnel in motion, many businesses have been holding back on investing in their staff, operations and technology to the detriment of UK productivity growth.
“There is little doubt that the past couple of years have been a maelstrom for firms across the spectrum. It speaks to the underlying strength of the UK’s business leaders and environment that, despite uncertainty, the labour market has continued to confound expectations and exports have been relatively resilient. But there is no room for complacency with policy instability and a lack of continuity eating into our long-term competitiveness.”
He said the Conservative leadership candidates had made some positive noises but needed to be clearer about their plans for improving skills and infrastructure.
This week, three closely watched surveys from IHS Markit and the Chartered Institute of Procurement and Supply suggested the UK economy had suffered its first quarterly contraction in seven years in the three months to June. This means that the economy could potentially slide into recession – where growth is negative for two consecutive quarters – before the UK’s scheduled departure from the EU on 31 October.
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