Confidence in UK economy reaches three year high

18 per cent of businesses expect their investment levels to increase, says a survey of company directors

Business confidence in the UK economy has reached its highest level since the 2016 EU referendum, according to a survey of company directors.

For the first time since spring 2018, firms are optimistic about the economic outlook, with a key confidence measure reaching 21 per cent in December, which is up from -18 per cent in November.

Directors’ confidence in their own firms also increased to 46 per cent from 26 per cent last month, according to the Institute of Directors (IoD), which polled members in the days following the election.

This increase was accompanied by a “significant” rise in firms’ investment intentions for 2020. A net balance of 18 per cent of directors expected their investment levels to increase, while hiring expectations also increased slightly.

However, the bulk of IoD members expect higher costs in 2020, indicating that the new government “has its work cut out” to support the labour market and cut firms’ mounting costs.

The current state of the economy remains the biggest challenge, followed by on-going uncertainty around the UK’s future relationship with the EU.

Tej Parikh, chief economist at the Institute of Directors, said: “Britain’s directors will be entering 2020 with a little more festive cheer than might have been expected only a few weeks ago.

"A firm majority government means that business leaders, whatever their personal views, now at least have a framework around which they can put in place plans to invest, hire, and expand.”

“There are undoubtedly some exciting stocking-fillers for businesses in the Government’s agenda.”

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