Corporate Confidence Takes a Sharp Dip Ahead of the Autumn Budget
Business leaders in the UK have seen their optimism take a nosedive as the government’s latest fiscal plans cast a shadow over the economic outlook. The downturn comes just weeks before Chancellor Rachel Reeves is set to unveil her Autumn Budget on 30 October.
IoD Confidence Index: A Worrying Trend
The Institute of Directors’ (IoD) Economic Confidence Index, which gauges how business leaders feel about the economy, has slipped dramatically. The fall is largely tied to dwindling investment intentions and the challenges of securing qualified staff.
Key Contributing Factors
- Labour shortages – still the biggest headache for companies.
- Economic conditions – the second most pressing concern.
- Employment taxes – climbing to the top five worries as the budget looms.
Underlying Indicators Show a Rough Patch
- Business investment intentions fell 14 points, from +24 in July to +10 in August. That’s the steepest drop since the first lockdown.
- Headcount expectations also dropped 14 points, mirroring the investment slump.
- Revenue expectations slipped from +36 to +28, while cost expectations edged higher, moving from +81 to +83.
- Export hopes fell from +12 to +8 – the lowest level since June 2023.
- Wage expectations dipped slightly, from +59 to +56.
Quarterly Factors That Businesses Find Sticky
In the most recent survey, UK economic conditions edged up to 56%, holding the top spot. Skills and labour shortages remain a close second at 43%. Meanwhile, business taxes have rose to third place (41%) from 33% in May, overtaking regulatory compliance (37%).
Emphasis on employment taxes has also gone up, jumping from 25% to 34% – moving from the eighth to fifth most‑wanted point of concern.
Interestingly, global economic conditions slipped down to eighth place, dropping from 33% in May to 26%.
Anna Leach Calls for Clearer Policies
Anna Leach, Chief Economist at the Institute of Directors, summed up the mood: “It’s disappointing to see last month’s uptick in confidence snuffed out over the summer.” She added that the sharpest declines are in investment and headcount expectations, with other measures taking a lesser, but still negative, hit.
“The chatter around employment rights and upcoming tax hikes has dampened the business environment,” Leach said. “As we head into a busy autumn, we need the government to get the policy design right for the long term and provide a stable tax and policy framework that fuels confidence and investment.”
She further urged: “Clarity on industrial strategy, a coherent business tax roadmap, and progress in engaging with businesses on workers’ rights would be welcome.”
As the budget countdown begins, the business community is watching closely, hoping for red‑emptive policy tweaks that could lift the current mood swing.
