Business confidence has risen for the fifth month in a row, according to a regular health check by employers’ lobbying group, the Institute of Directors.
The IoD’s “economic confidence index,” which surveys company heads on topics including the broader economy and their own hiring and investment plans, rose to minus 5 in April, from minus 13 the month before.
While the negative value still indicates pessimism outweighs optimism among managers, it suggests a much brighter outlook than November 2022, when the index fell to -64.
The directors’ outlook measure is now back to levels last seen immediately before the Russian invasion of Ukraine in 2022, when it was a fraction more positive at -4.
“It is particularly reassuring to see a recovery in investment intentions, raising hopes that economic fundamentals may continue to improve in the coming months,” said Kitty Ussher, IoD chief economist and former City minister at the Department of Labor. .
While improving survey data offers hope that UK economic growth is no longer leveling off, Ussher acknowledged concerns about high inflation persist, with only a quarter of members believing it has reached its Maximum point.
The proportion of managers who were “quite optimistic” or “quite pessimistic” about the overall economy was almost identical at just under 31%.
The IoD survey coincides with responses to a quarterly survey conducted last month by the British Chamber of Commerce (BCC).
Continuing a more buoyant trend since the Truss/Kwarteng budget debacle last September, the BCC found that more than half of UK businesses (52%) said turnover from their business was likely to increase in the coming 12 months, up from 44% in the last three months of 2022.
Business optimism may come under pressure if the world’s major central banks embark on further interest rate hikes over the next fortnight, as expected.
The Bank of England, the European Central Bank and the US Federal Reserve are all forecast to raise rates to reduce inflation. City analysts have predicted that BoE policymakers will boost the UK base rate on May 11 from 4.25% to 4.5%.
The consensus outlook in the IoD survey suggests that inflation has already peaked (25%) or will peak this year in the spring (11.9%), summer (19.7%) or fall (14.2%) .
However, a small proportion of the 949 respondents believe that inflation will not peak until after the summer of 2024.