Business Confidence Stays Flat, survey shows

16 January 2005

Contrary to other recent business surveys suggesting a pick-up in the economy, the latest GfK survey of 500 business leaders, for the Institute of Directors (IoD), shows business confidence is flat. The IoD survey, released today, shows there has been no significant change in business optimism or performance over the past three months.

Across a range of survey indicators including business optimism, performance, profitability, capacity utilisation and investment intentions, the message of the IoD survey is that very little has changed recently (see attached table for survey details).

Graeme Leach, Chief Economist at the IoD, said:

"Thinking about UK growth prospects, there is nothing in our survey results to get excited about. The latest results suggest the GDP growth rates seen in the second half of 2005 are likely to persist into the first half of 2006. These figures are not a great start to the New Year but they are a reality check after the exuberance of the festive season. The good news in the survey is the absence of any build-up in price pressures."

Specifically, the survey reports:

• The balance of those directors stating their company was performing well, versus those stating it was performing badly, stood at 66% in the latest survey, compared with 70% previously.
• The balance of those directors more versus less optimistic about their company's prospects, compared with three months ago, stood at 29% in the latest survey, compared with 33% previously.
• The outlook for company profitability edged up slightly. The balance of those directors expecting the trend in net profits to be up, versus those expecting it to be down, rose from 33% to 36% in the latest survey.
• The balance of those directors reporting their company was/was not operating at full capacity stood at -16% in the latest survey, compared with -14% previously.
• The investment intentions balance of those directors more versus less optimistic about their company's investment outlook, slipped from 12% to 9% in the latest survey.