The Institute of Directors (IoD) has reported that business confidence in the UK has fallen sharply to its lowest point this year, with its monthly optimism index dropping to -61 from -53 in May. The survey, which measures sentiment among company directors, also showed revenue expectations sliding to their lowest point of 2026.
IoD warns Burnham on reform priorities
The IoD issued a direct message to Andy Burnham as he prepares to overhaul Whitehall and devolve power to the North of England. Anna Leach, chief economist at the IoD, said: "While there is a logic to changes in the machinery of government, what matters is delivery on the ground. Businesses need to see meaningful improvements in areas like regulatory cost, tax complexity and swiftness and consistency of government decisions to fundamentally unlock spending and get growth going."
Economic aftershocks from Iran conflict
Economists note that businesses are still feeling the aftershocks of the collapse in trade across the Strait of Hormuz, a vital Middle Eastern chokepoint shut off due to the Iran war. Bank of England analysis indicates that the impact on consumer demand and a surge in input costs could leave businesses grappling with inflation and sluggish growth for the remainder of the year.
Supply shortages and fuel risks
According to the IoD survey, 43% of business leaders said supply shortages could affect their operations, with firms remaining apprehensive about disruptions stemming from the breakdown of trade across the Middle East. Fuel shortages emerged as the greatest risk facing businesses, with a larger share of directors flagging concerns compared to April.
Cost expectations stable despite oil price drop
Cost expectations remained stable despite a sharp drop in oil and gas prices earlier this month, triggered by the announcement of a draft peace deal between the US and Iran. It had been hoped the agreement might ease price pressures and keep inflation in check.
IoD calls for tax simplification
Anna Leach said disruption and uncertainty were "becoming normalised" for 80% of companies, and called on ministers to simplify the tax system and reduce regulatory costs to ease pressure on firms. "As well as easing back on investment and hiring, this is pushing businesses to prioritise resilience over expansion, maintain higher reserves, reduce discretionary spend, diversify their supply chains and enhance their risk management," Leach said.
Confidence varies by region
The IoD's findings broadly mirrored those of Lloyds Banking's business barometer, which similarly indicated a drop in confidence levels. International businesses that participated in Lloyds' survey were notably more upbeat about growth prospects, as their outlook on the wider economy improved. Confidence among businesses was strongest in London and the East Midlands, according to the bank, whose survey encompasses companies with an annual turnover exceeding £250,000.
