UK business confidence plunges to another record low

Business confidence in the future of the UK economy has plunged to another record low as directors fear the war will damage investment plans and increase costs, a leading survey has found.

Research by the Institute of Directors recorded business confidence dropping to a net figure of -76 in March, compared to -63 in February.

Cost expectations rose to the second highest level on record after last September at the height of pre-Budget tax speculation while revenue expectations for the year dipped.

Business leaders’ confidence in their own organisations, which has typically been in positive territory, dropped to minus two.

The figures are set to add pressure on the government as it faces calls not to ignore businesses when Rachel Reeves announces further “targeted” support in the coming weeks.

While household bills will be protected by the energy price cap until July, businesses are likely to suffer from the variable costs of higher oil and gas prices, which are around 70 per cent higher than before the war began.

In its survey of around 600 business owners, the IoD said 71 per cent were concerned about geopolitical tensions and 69 per cent were worried about energy price volatility.

More than half also raised concerns about cyber-attacks and supply chain disruption.

Business confidence lower for manufacturers

Anna Leach, chief economist at the IoD, said manufacturers were at the “sharp end of results” as many had reported an immediate negative impact.

“Impacts being reported include sharp increases in fuel and shipping costs, rising material prices – such as petrochemicals – and delivery delays,” Leach said.

“Across all sectors, the general increase in uncertainty is once again delaying decision-making, as many wait to see how the conflict evolves.”

Leach also warned the government against focusing its cost of living message on profiteering by companies given the private sector could face a “severe” hit over the coming months.

“The government is right to be alert to the risks of another cost shock to the economy, and has been agile in giving vital support to households exposed to heating oil costs. But it should avoid framing price increases as profiteering when many businesses are facing genuine and significant cost pressures from energy, logistics and supply chain disruption.”

The only area of the survey to show some improvement was in the labour market as headcount expectations were back on a neutral level.

Wage expectations also inched up slightly, which could worry Bank of England policymakers concerned about inflation.