Political change unnerves business leaders

The Conservative leadership contest has unnerved business leaders, a survey from the Institute of Directors (IoD) reveals.

Nine hundred company directors were surveyed at the time Theresa May announced her resignation as Prime Minister. Optimism in the business climate fell around eight percentage points to -28 per cent. Prior to the resignation, sentiment had improved steadily since the turn of the year.

The IoD said today (July 5): “Firms’ outlook for the economy reached a nadir of -38 per cent in December 2018 having fallen continuously since spring last year. The confidence metric has now been in the red for 12 months in a row.”

The IoD’s Confidence Tracker found bosses’ belief in their own firm’s prospects stayed reasonably resilient, at positive 27 per cent. However, their expectations for future investment (seven per cent) and employment (16 per cent) remained weak, while anticipated costs remained elevated – explaining their negative outlook for the year ahead.

Aside from the UK’s economic conditions, the biggest factors directors cited as having a negative impact on their business were ongoing Brexit uncertainty, skills shortages, and the burden of regulatory compliance.

Tej Parikh, chief economist at the Institute of Directors, said: “Dealing with political uncertainty is part and parcel of leading a business, but this has been taken to extremes over recent years. With the nature of Brexit still ambiguous and another shakeup of key Government personnel in motion, many businesses have been holding back on investing in their staff, operations and technology to the detriment of UK productivity growth.

“There is little doubt that the past couple of years have been a maelstrom for firms across the spectrum. It speaks to the underlying strength of the UK’s business leaders and environment that, despite uncertainty, the labour market has continued to confound expectations and exports have been relatively resilient. But there is no room for complacency with policy instability and a lack of continuity eating into our long-term competitiveness.”

Mr Parikh added: “The Conservative leadership candidates have made some positive noises, but businesses will be eager to get more meat on the bone when it comes to their plans in areas like skills development and infrastructure. The long-standing concerns of enterprise must form a central part of the UK’s growth agenda going forward.”

UK economic conditions and an uncertain trading status with the EU topped concerns, along with a skills shortage and compliance.

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