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Summary
- A new survey by the Institute of Directors found that UK’s business leaders’ confidence in the economy was at an all-time high.
- The rally in optimism was primarily driven by positive sentiments around the vaccination drive.
- Confidence in UK’s economic climate in June increased by 14 points to reach 27 points.
A new survey by the Institute of Directors (IoD) has found that the optimism around a successful vaccination programme has boosted UK business leaders’ confidence in the economy. The body’s confidence tracker managed to remain in the positive zone for a year now, meaning that directors of various companies were optimistic and not pessimistic about economic revival.
The sentiments were also echoed in Wednesday’s IHS Markit’s purchasing managers' index for June, which showed that firms were in expansion mode. Just as the customer-facing businesses picked pace as the lockdowns were gradually eased, the UK economy continued on its revival path.
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June’s flash PMI for services was at 61.7. A score above 50 stands for growth, and below it signifies contraction. As the economy reopened, businesses in June recorded a surge in demand, led primarily by the hospitality sector.
IoD’s confidence tracker surveyed 651 directors. The survey found that the confidence in UK’s economic climate in June jumped to 27 points, an increase of 14 points from the first quarter. The survey said that since the organisation began recording confidence among its members in 2016, business optimism touched the highest level in June.
The optimism grew incrementally this year, as vaccines got approved for use in December. There was a significant fall in confidence last year during the first lockdown announced in the UK to tackle the spread of Covid-19.
European economies have achieved big growth numbers as soon as restrictions began to be withdrawn through the last couple of months. The UK opened outdoor dining, and non-essential retail resumed operations mid-April onwards, while indoor seating like bars and pubs opened for customers in May.
IoD’s chief economist Tej Parikh said directors are now ready to take their businesses forward after a turbulent period of trying to save them. Parikh said that directors are full of confidence for the remaining year, despite the government delaying the complete reopening. To cater to the pent-up demand, directors are looking forward to rebuilding their teams.
The survey also found that the one-year outlook that directors had for their own firms increased to 50, a record high after it was reported at 41 in the first quarter.
According to IoD, as the uncertainties around Brexit eased and there was more clarity about by when restrictions would end, there was an uptick in hiring and investment intentions for the year as well.
However, IoD has also warned that with the economy picking pace, businesses would also face challenges like supply chain, skill shortage post Brexit issues, and debt servicing.
