The IoD Directors’ Economic Confidence Index, which measures business leader optimism in prospects for the UK economy, stabilised at -6 in May 2023, little changed from the previous month’s value of -5 and ending a five-month climb from a low of -64 in November 2022.
The current reading is a broadly neutral-to-negative stance, with 39% of IoD members feeling pessimistic about prospects for the UK economy in the year ahead compared to 33% feeling optimistic over the same time horizon.
When asked about current pain points for their organisation, the most common concerns were UK economic conditions (52%), skills shortages/employee skills gaps (46%) and the cost of energy (45%). These were the same top three concerns as the last time that question was asked in February 2023.
The index of director confidence in future prospects for their own organisations rose to +44 in May, up from +42 in April. 55% expected revenues to rise in the next year, compared to 19% who expected revenues to fall, giving a net positive result of +36, similar to the +37 recorded in April.
Responding to the data, Steven Mooney, Founder and CEO of FundMyPitch said: “With business confidence remaining lukewarm and the skills shortage continuing to hamper growth, it’s time to start a serious conversation about the need to give companies the investment and support they need to expand their skillset. For many ambitious organisations, whether that by startups or high potential SMEs, dedicated funding remains elusive, and this has a detrimental impact on economic growth. Culturally and operationally, the UK needs to think again about the importance of turbocharging the next generation of entrepreneurs with dedicated funding, something which is a given in markets like the US.”
Meanwhile Suid Adeyanji, CEO of RiverSafe, said: “Recruiting and upskilling staff with digital skills and security expertise remains a top priority for businesses who cannot afford to compromise in key areas such as cyber skills. Part of forming an effective cyber strategy requires staff that have the skills to protect assets, mitigate threats, report incidents and activate recovery protocols to get systems back online. Training staff with cyber awareness and skills is essential during times like these with warnings from the NCSC of ongoing threats, so business must be prepared and confident, else become susceptible to major attacks. “
Meanwhile Sjuul van der Leeuw, CEO of Deployteq said: “Once again, the skills crisis tops the league table of issues hampering growth and causing frustration to business owners. In a rapidly changing digital world, building a workforce adept in AI, coding and analytics is a key differentiator for companies looking to maintain the competitive advantage. However, many businesses are still operating expensive and ineffective manual systems across key functions like marketing and sales, meaning staff are under huge pressure to develop their skillset to keep up with the pace of the market.
“Forward thinking organisations will look to implement the right technology platforms to liberate workers, giving them access to powerful tools to improve their performance and fulfil their potential without having to enrol on a coding course,” he added.
Sheila Flavell CBE, COO of FDM Group said, “Getting access to staff with the latest digital skills remains a top priority for businesses, yet all too often the chronic supply shortage means that many are operating without the resources they need. Closing the skills gap requires a concerted effort to encourage the next generation to study and explore a career in key disciplines like coding, cyber and AI. Diversity levels are improving, but still so much more needs to be done to attract people from different backgrounds to enter the technology industry.
Flavell continued, “This challenge can will be solved, but only by rapidly upskilling existing workers, and making it clear that a career in technology is a fantastic route to take, whatever your circumstances.”
35% expected to increase their headcount in the next year, compared to 14% who expected to reduce it, giving a net positive result of +21, similar to the +22 recorded in April. 38% expected to raise levels of investment in their business in the next year, compared to 17% who expected to reduce it, giving a net positive result of +22, continuing the steady improvement from +18 in March and +20 in April.
Kitty Ussher, Chief Economist at the Institute of Directors, said: “Confidence improved in the first few months of the year as business leaders began to believe that the outlook for the UK economy, although difficult, was not as bad as they had previously been led to believe. Our confidence index is now stabilising at a just-below neutral stance, similar to that recorded before the invasion of Ukraine.
“Although investment intentions are picking up and our members are broadly planning for growth it will take a greater sense that the worst is behind us before confidence really starts to lift.”
The IoD Directors’ Economic Confidence Index measures the net positive answers from members of the Institute of Directors to the question ‘How optimistic are you about the wider UK economy over the next 12 months?’ on a five-point scale from ‘very optimistic’ to ‘very pessimistic’.