The IoD Managers’ Economic Confidence, which measures business leaders’ optimism about the outlook for the UK economy, fell to -31 in June 2023, down from -6 in May, wiping out improvements recorded since the start of the year.
Reasons for the drop are larger concerns about inflation and, separately, lower UK customer demand. Among those who were pessimistic about the UK economy in June. A third cited “UK inflation” as the main reason, up from 26% in January with 19% citing “lower UK customer demand” as the main reason, up from 11% in January.
Business leaders’ optimism in their company’s prospects also fell between May and June, from +44 to +29. Companies are also more cautious about their investment commitment: net investment intentions fell from +22 in May to +11 in June.
Kitty Usher, chief economist at the Institute of Directors, said: “The surge in optimism and investment plans that we have seen in recent months came to an impressive halt in June as business leaders took stock of worse-than-expected inflation data and what that meant for interest rates and the broader outlook for the economy.
“With business confidence in the economy waning, many investment plans that were only recently phased out are now being put on hold again as business leaders consider whether the general business environment is now too risky to consider expansion.”
The IoD Managers Economic Sentiment Index measures net positive responses from Institute of Directors members to the question “How optimistic are you about the broader UK economy over the next 12 months?” on a five-point scale from “very optimistic” to “very pessimistic”.
New data points will continue to be available on the first day of each month containing data obtained from a survey of IoD members in the field during the previous month.