The confidence of British business leaders “declined” in December because Omicron coronavirus variant According to a survey conducted by lobbying groups, people are greatly discounting the expectation that the pandemic will end, and most directors plan to pass on the soaring costs to consumers.
The Economic Confidence Index of the Institute of Directors-the proportion of directors who say they are optimistic about the UK’s economic outlook next year minus the proportion of pessimistic directors-dropped from minus 6 last month to minus 17 in December.
Kitty Ussher, IoD’s chief economist, stated that business confidence in the “already fragile” UK macro economy “tumbled in December because the Omicron variant changed consumer behavior and dashed hopes that the pandemic had passed. “.
This figure is based on interviews conducted between December 13 and 30, which fully reflects the impact of Omicron’s spread. It is lower than the positive 27% in June and the lowest score since November last year, when most parts of the country were in Locked state.
IoD is a non-partisan political organization with approximately 20,000 members from most industries, including CEOs of large companies and directors of startups.
The survey also revealed that about three-quarters of directors said they expect costs to increase in the next 12 months, and a similar proportion of directors said they would raise prices in whole or in part to offset the increase in costs. Only 6% of respondents indicated that they will increase investment in areas aimed at increasing productivity to cope with rising costs.
“We are now seeing extensive evidence that inflationary pressures are ingrained throughout the economy, and business leaders pass on the increased costs almost without hesitation,” Ussher said.
These data reinforce expectations that UK inflation will further soar above the Bank of England’s 2% target in the coming months. In December, the bank Increase Interest rates rose from 0.1% to 0.25%—the first increase in more than three years—in response to the 10-year high of inflation that rose to 5.1% in November.
Ussher pointed out that the sudden drop in confidence could hurt business investment because “if the climate feels uncertain, companies are unlikely to invest.”
Approximately 31% of directors still expect higher investment next year, which is consistent with economists’ views expect Excess tax incentives for factory and machinery expenditures have spurred a rebound in business investment.
However, this ratio is down by two percentage points from November, and the proportion of directors whose investment is expected to decrease next year will increase.
This is important because “we need investment to promote economic growth,” Ussher said. Investment is a key driver of productivity growth.
What’s more encouraging, however, is that the directors’ confidence in their organization’s prospects remains stable. About 54% of directors are optimistic about the company’s prospects for the next 12 months in December, while 15% are pessimistic. This is similar to the value recorded in November 2021.