Business confidence remained at “historically depressed levels” in January, according to a new survey which demonstrates the pressures facing firms early in the new year.
The Institute of Director’s (IoD) economic confidence index stood at -59, which was up slightly from -61 in December but still at a very weak ebb.
Many of the survey’s underlying indicators also worsened, with investment intentions dropping as well as headcount expectations.
“Confidence remains close to its Covid lows,” Anna Leach, chief economist at the IoD said.
“It is clear that companies continue to be challenged by the breadth and scale of cost increases announced at the Budget, and this risks undermining both the investment needed to drive growth and the sustainability of the public finances,” she said.
The survey confirms that confidence in the economy remains very weak at the start of the new year following an underwhelming end to 2024.
Growth has ground to a standstill since Labour’s election victory last summer and many forecasters have cut their projections for 2025.
Like many business surveys, the IoD’s showed that corporate confidence nosedived in the wake of the government’s maiden Budget, helping to drive the slowdown.
The centrepiece of the fiscal event was a £25bn increase in employers’ national insurance, which many firms have warned will stifle investment and cause job losses.
The tax raid also came alongside a hefty increase in the minimum wage and an overhaul of workers’ rights, all of which have piled extra pressure onto employers.
When asked what measures would boost business confidence in 2025, 58 per cent of business leaders selected a reduction of the tax burden. 42 per cent suggested a “significant scaling-back” of the new employment laws would improve confidence.
The government has tried to turn the page on the economy, making a series of eye-catching announcements over the course of the week.
This has included signalling support for a third runway at Heathrow and reviving the Oxford-Cambridge growth corridor.
“The recent shift in the government’s rhetoric to emphasise growth is very welcome,” Leach said.