The Institute of Directors (IoD) has revealed a significant drop in optimism among its members, marking the lowest levels since the COVID-19 pandemic began. This decline follows the recent budget introduced by Finance Minister Rachel Reeves on October 30, which featured substantial tax increases.
Investment and employment intentions have weakened considerably, with the latest figures reflecting the most pessimistic outlook since May 2020. The optimism index plummeted to -65, a stark decline from -52 in October.
IoD Chief Economist Anna Leach emphasized the detrimental impact of the budget on business confidence, stating, “As businesses continue to absorb the consequences of the Budget for their business plans, confidence has continued to plummet.” She criticized the budget for not only failing to bolster the economic foundations but for undermining them, thus crippling the private sector’s capacity to invest in growth and workforce development.
This report aligns with a growing chorus of concerns voiced by businesses in response to the budget and signals of an economic downturn. Last week, Reeves assured the Confederation of British Industry that future budgets would not introduce further borrowing or tax increases.
Among the measures announced were £40 billion in tax hikes, including a £25 billion rise in employers’ annual social security contributions. Reeves attributed the larger-than-expected tax increases to a challenging fiscal legacy left by the previous Conservative administration.
Additionally, potential changes to employment laws are expected to further escalate costs for employers, as highlighted by the IoD. The survey, conducted between November 15 and November 27, garnered 601 responses, predominantly from small businesses, reflecting a concerning trend for the UK economy.
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