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The Institute of Directors’ index, which measures business leader optimism over prospects for the UK economy, rose in April after falling to an historic low in March, but challenges still remain.
The data reached -64 in April compared to -76 in March Business leader confidence in their own organisations also rose, to +8 in April from -2 in March.
Improved underlying indicators included cost expectations falling to +85 from +88, investment intentions to -9 from -13, revenue expectations to +17 from +13. In addition, export expectations were broadly unchanged at +3 from +2 and headcount expectations dropped to -3 from 0.
Despite the increase confidence, business leaders expressed concern about the impact of the Middle East war on their supply chains.
One in five said there organisations had already experienced shortages as a result of the Iran conflict, of 32% judged them significant
Amongst those who reported shortages, 55% had experienced shortages in fuel or energy, 38% in industrial materials and 34% in components or parts
Over half were worried about shortages impacting their business in the coming months, with 76% concerned about fuel or energy, 35% components or parts and 34% industrial materials
Only 37% have taken, or are planning to take, action to mitigate the impact of shortages on their business – with the most significant action being increased awareness of supply chains (25%), improved relationships with key suppliers (19%) and diversification of suppliers across a broader range of countries (18%).
Anna Leach, chief economist at the Institute of Directors, said:
“As the conflict in Iran continues, there are growing concerns among firms over potential shortages, particularly amongst those with complex physical supply chains. Around a third of manufacturers, wholesalers/retailers and construction companies have already experienced shortages. And you can see firms are taking clear steps to better manage risk to their supply chains, through investing time in improving relationships with key suppliers, better understanding vulnerabilities in supply chains, diversification and stockpiling.
“Amidst yet another global shock, there’s a distinct sense from business leaders that navigating global uncertainty is becoming normalised in board rooms. April has seen a small improvement in the confidence of business leaders in the economic outlook, accompanied by rises in revenue expectations and investment plans. Although these improvements are from very low bases, there is more evidence of targeted investment resuming, particularly in AI, with growth opportunities in renewables and international markets. But the dominant theme is of ongoing cost pressure, regulatory burdens, fragile demand and hiring freezes.
“As firms take actions to address their own resilience and supply security, it is important for the UK to do the same. Increased access to international markets – including the EU – will improve the UK’s growth resilience over time. But urgent action is needed to address UK energy costs. There must be an honest recognition that the UK will remain reliant on fossil fuels for many years to come, even while we push hard for the important shift to renewables. It makes sense to exploit and monetise our own resources, for the UK’s economic security.”
