By Daniel Hunter
A new poll of over 1,000 business leaders brings good news on the economy. Nearly two-thirds (62%) of Institute of Directors members think that the outlook for the UK economy is now brighter than at any stage since the financial crisis of 2008.
Directors are also feeling more confident about the performance of their company over the coming year, with the majority (59%) saying they have high confidence. On a confidence scale of 1 to 10, the average rating for the next 12 months was 6.7, up from 6.3 in the first quarter of 2013, but still only showing a medium level of confidence.
There was also good news on business investment. The proportion of business leaders expecting their investment to be higher in 2013 than 2012 exceeds those expecting it to be lower by 23%.
However, IoD members’ confidence does not extend into 2014, when 39% of members expect the economy to grow less than the 1.8% forecast by the Office for Budget Responsibility.
“Just as the weather gets hotter the economy seems to be warming up as well. Business leaders clearly believe that the UK economic outlook is improving and they are even more optimistic about the outlook for their own companies," IoD Chief Economist Graeme Leach said.
"Let’s hope they’re about to dust off plans for business investment and recruitment which have been sitting on the shelf over recent years.”
The survey also questioned business leaders on the Government’s fiscal plans. On deficit reduction, the majority (54%) feel the Government’s current approach is correct. Where there is criticism, it comes mainly from those who think that the Government should be doing more to reduce the deficit (29%).
74% of members support the decisions announced at the recent spending review, with 84% endorsing the 1% cap on pay rises for public sector workers. However, over half (56%) think that the Government is not investing enough in key infrastructure. Members highlighted roads, airports and railways as priorities for investment.
“It’s pretty clear that business leaders support the overall direction of fiscal policy. IoD members recognise the political realities but a significant minority would like to see the Chancellor going further and faster on deficit reduction," Graeme Leach said.
"The exception to this view is key infrastructure spending, where business leaders are shouting out for more not less money, financed preferably from lower public spending elsewhere”.
The survey of 1,056 IoD members ran from 26 June to 5 July 2013.
- 62% of IoD members surveyed agree with the statement that “the outlook for the UK economy is now brighter than at any stage since the onset of the financial crisis in 2008”. 18% neither agree nor disagree, and 20% disagree with the statement.
- On the IoD’s 1-10 scale of confidence about the outlook for the UK economy over the next 12 months, 34% have high confidence (7-10 on the scale), 44% have medium confidence (5-6 on the scale), and 23% have low confidence (1-4). The mean score was 5.7 — this is up from 5.0 in Q1.
- Members continue to have greater confidence in the outlook for their own organisations than for the economy as a whole. On our 1-10 scale of members’ confidence about the outlook for their organisation over the next 12 months, 59% had high confidence (7-10 on the scale), 32% medium confidence (5-6 on the scale), and 9% low confidence (1-4). The mean score was 6.7 — this is up from 6.3 in Q1 2013.
- 35% of members believe that UK economic growth will outperform the OBR forecast for UK GDP growth of 0.6% in 2013. 38% believe the OBR have got the forecast right, and 22% believe the economy will underperform the OBR forecast. The net balance (outperform minus underperform), is +13%. This compares to a balance of -8% when we asked the same question in Q1.
- However, IoD members remain cautious, with the 2013 pattern reversed for 2014: 22% believe the economy will grow by more than the forecast 1.8%, 32% the same, 39% less. However, this is an improvement on Q1 (16% higher, 26% same, 52% lower).
- We asked members what they believed the outlook was for their organisation comparing 2013 with 2012. On all four key measures, the balance figures were strongly positive, as follows: revenue (+42%); profitability (+29%); business investment (+23%); employment (+21%). These figures are a big improvement on Q1, when the corresponding results were: revenue (+29%); profitability (+15%); business investment (+4%); employment (+10%). Since we started asking this type of question in Q1 2012, the business investment figure of +23% is by some margin the highest we have had — the previous high was +7% in Q4 2012.
- There continues to be strong support from business leaders for the Government’s approach to managing the UK’s fiscal deficit. 54% of members believe the Government should “stick with its current plans to reduce the deficit.”
- The main criticism of Government policy seems to be from those business leaders who want to go further and faster on deficit reduction. 29% believe the Government “should do more to reduce the deficit”. A small proportion of IoD members (14%) believe the Government “should ease off its current plans” to reduce the deficit; only 3% think it should reverse current policy.
- 74% of members support the Spending Round 2013 decisions announced by the Chancellor. 11% neither support nor oppose them, 12% oppose, 3% don’t know.
- Only 30% of members think the Government is proposing to invest sufficient resources in key infrastructure (taken to mean transport, energy & IT). 56% think there is insufficient resource being devoted to infrastructure.
- 84% of members support the 1% cap on pay rises for public sector workers (10% opposed).
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