Confidence crash: bosses lose nerve as economy stalls

Business confidence is a fickle thing. The latest index from the IoD (Institute of Directors) shows that the confidence figure in February was -63, having risen in Jan to -48 from an historic low of -72 in Dec. The latest figure came out before the rapidly developing situation in the Middle East started so this will be an ever changing picture.

Bosses were already exasperated at the state of the UK economy before the US and Iran locked horns. However, bosses also had less confidence in their own businesses in February with that indicator falling from +14 to +1. The IoD asks business leaders of all sizes each month how confident they are in the business landscape and economy in general and in their own businesses.

The biggest drop in confidence is around expectations for hiring people and increasing revenues with concerns about the economy, employment taxes, heavy regulation and the global political satiation being cited as dampeners on growth. The latest tariffs and the impending employment rights changes will have a negative impact too. Without business-friendly policies small and micro businesses simply can’t build up the courage to take bold steps like investing in people and equipment, technology and innovation.

As I type, we’re a day away from the Government’s Spring Statement. It seems from forecasts that the best we can hope for is no big announcements and some stability. The statement is expected to give us a picture of how the Government is doing in terms of reaching its goals on the economy rather than introducing any new business taxes or measures. Its all been mercifully quiet on the ‘leaking of possible changes’ front.

However, the new war could upend all plans and will certainly have an impact on inflation. Inflation for businesses in particular is a worry given the huge increase in oil prices we’ve seen already. The picture is changing by the hour and that impacts business confidence dramatically.

Businesses need certainly before they grow confidence and they need confidence to invest. One thing is certain: we’re unlikely to see much in the way of more jobs being created soon. We may even see a speeding up of job cuts as margins tighten and confidence falls. And if you are in the market for people, you may well opt for someone with more experience and better skills rather than employ a new comer to the workforce.

All in all, uncertainty is growing and confidence is falling and our micro and small businesses are in the eye of the storm. I don’t have the confidence to predict where the confidence index will sit this time next month.

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