Business confidence has increased for the fifth month in a row, according to a regular health-check by bosses’ lobby group the Institute of Directors.
The IoD’s “economic confidence index”, which surveys company directors on issues such as the wider economy and their own plans for hiring and investment, rose to -5 in April, up from -13 the previous month.
While the negative value still indicates that pessimism outweighs optimism among directors, it suggests a far brighter outlook than November 2022, when the index dropped to -64.
The measurement of directors’ outlook has now returned to levels last seen immediately before Russia’s 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 the hope that the economic fundamentals can continue to improve in the months ahead,” said Kitty Ussher, the IoD’s chief economist and former City minister under Labour.
While the improving survey data offers hope that UK economic growth may no longer be flatlining, Ussher acknowledged that concern about high inflation persists, with only a quarter of members believing it has peaked.
The proportion of directors who were either “quite optimistic” or “quite pessimistic” about the wider economy was almost identical at just under 31%.
The IoD survey chimes with responses to a quarterly survey by the British Chamber of Commerce (BCC) last month.
Continuing a more buoyant trend since the Truss/Kwarteng budget debacle last September, the BCC found that more than half of UK firms (52%) said their business turnover was likely to increase over the next 12 months, up from 44% in the last three months of 2022.
Business optimism can expect to come under pressure should the world’s leading central banks embark on a further increase in interest rates over the next fortnight, as expected.
The Bank of England, the European Central Bank and the US Federal Reserve are forecast to push rates higher to bring down inflation. City analysts have predicted policymakers at the BoE will push the UK base rate up on 11 May from 4.25% to 4.5%.
The consensus outlook in the IoD survey suggests that inflation has either already peaked (25%) or will do so this year in either spring (11.9%), summer (19.7%) or autumn (14.2%).
However, a small proportion of the 949 survey respondents think inflation will not reach a peak until after summer 2024.