Confidence among business leaders has collapsed as the invasion of Ukraine, rising costs and soaring inflation weigh heavily, a survey by the Institute of Directors has found.
The IoD’s Directors’ Economic Confidence Index tumbled to -34 in March from -4 in February, the lowest level since October 2020.
Investment intentions also fell, with the net proportion of firms planning to increase investment falling to 2% from 14% a month previously.
Just over half of businesses surveyed – 51% – said they expected inflation be higher than 6% by the end of the year, compared to just 18% at the start of the year. Inflation currently stands at 6.2%, the highest in three decades, and the Office for Budget Responsibility expects it will peak at over 8% in the winter.
A total of 53% of respondents said the cost of energy was having a negative impact on their businesses, while 39% expect employment taxes to similarly hit home. National Insurance contributions are set to increase next month.
Kitty Ussher, chief economist at the IoD, said: “Business has experienced a dramatic collapse in confidence following the invasion of Ukraine, leading to many firms putting investment plans on hold.
“The reality of higher energy and commodity prices, plus the hike in employment taxes, all overlaid with a general climate of deep uncertainty, is now having a real impact.
“The chancellor has said he will look again at tax incentives for business investment over the next few months. That work has now become even more urgent.”
A total of 689 respondents were surveyed by the employers’ organisation between 11 and 28 March. The Economic Confidence Index asks respondents how optimistic they are about the wider UK economy over the next 12 months.