UK businesses are still gloomy about the economy, accordingto figures released today. A survey from the Institute of Directors (IoD) showsthat few employers are optimistic about the future. Although there has been anoverall modest increase in company performance in the last three months,business optimism; employment; output; and profits are all still depressed.

The IoD's Business Opinion Survey for the second quarter of2003 showed some improvement on the very negative picture at the beginning ofthe year when business uncertainties lingered over the impending war in Iraq.But expectations remain low.

Ruth Lea, Head of thePolicy Unit at the IoD, said:

"The latestBusiness Opinion Survey shows a business sector under pressure. Even thoughthere are modest improvements compared with Marchs survey they can probably beattributed to post-war relief that the Iraq war was quick and oil supplies wereuninterrupted. All the major indicators of economic and business activityremain relatively weak. And this is especially true of manufacturing. There isno indication in these figures that there will be a return to strong economicgrowth. "

The survey foundthat:

Company performanceappeared to improve in June but was still weak. Even though the majority ofrespondents reported their companies were still performing well, the balance ofthose companies performing well, minus those performing badly, was just 56 percent in June 2003 compared with 72 per cent in December 2001 and 80 per cent inJune 2001. Performance in the manufacturing sector actually deteriorated and,showing a balance of 39 per cent, was the worst since the current surveystarted in 1996.

Business optimism didappear to bounce back in June but this statistic relates to the balance ofcompanies that were more, rather than less, optimistic about their companysprospects relative to the previous quarter. And the previous quarter wasundoubtedly clouded by events in Iraq.

The results oncapacity utilisation, order books, employment growth, output growth, profitsand investment were, on balance, better, but still weak compared with previousyears. The manufacturing sector continued to return particularly worryingresponses.

Price pressuresremained weak, with many more respondents reporting increased costs (a balanceof 33 per cent) than increased prices (a balance of -3%) - putting a squeeze onmargins. Average pay settlements were around a modest 3.3 per cent in June,similar to Marchs 3.2 per cent.

Ruth Lea, said:

"There aresimply too many negative factors around not least of all the weak globaleconomy. The US economy remains seriously unbalanced, but through sheer energyand drive will eventually recover. This cannot be said about Germanys weaknessand there have to be doubts about the economic robustness of the other majorEuropean economies.

"Meanwhile,domestically, the Government persists in hampering business with more taxes andred tape despite increasing evidence that this pernicious combination destroysenterprise, wealth creation and job creation. In addition consumer spending andthe housing market, which have underpinned growth in recent quarters, areweakening."

Ends 10.7.03 No.183

Notes to Editors

1. The main results of the Business Opinion Surveys since 2000Q1 are attached. For a full copy of the latest Survey contact the Press Officeon 020 7451 3264.

2. The IoD (Institute of Directors) is a non-party politicalindependent organisation with around 55,000 members. In addition to its widerange of business services, the IoD provides an effective voice to representthe interests of its members to government and key opinion-formers. It alsobrings he experience of business leaders to bear on the conduct of publicaffairs.

Contact Points:

Ruth Lea, Head of thePolicy Unit, tel: 020 7451 3291

Graeme Leach, ChiefEconomist, tel: 020 7451 3366

Richard Taylor, PressOfficer, tel: 020 7451 3264

mobile and out of hours: 07721 734886

David Marshall,Director of Public Affairs, tel: 020 7451 3263

mobile and outof hours: 0776 4883420

email: press@iod.com

web: www.iod.com

The main results of Business Opinion Surveys since 2000first quarter are shown in the table below (all the data related to balancesexpect for pay settlements which relate to an average):

	00 Q3	00 Q4	01 Q1	01 Q2	01 Q3	01 Q4	02 Q1	02 Q2	02 Q3	02 Q4	03 Q1	03 Q2

Company performance	76	75	78	80	76	72	67	61	62	60	53	56
- of which manufacturing	70	59	72	72	76	63	58	51	58	58	57	39
Optimism	39	35	28	28	23	10	40	23	27	15	-6	23
- of which manufacturing	38	22	3	19	16	12	32	12	28	22	-25	15
Capacity utilisation	-8	-6	-13	-22	-7	-21	-29	-25	-21	-18	-27	-28
- of which manufacturing	-27	-31	-18	-42	-4	-34	-39	-39	-14	-17	-37	-30
Order books (total)	24	27	20	9	11	6	7	-2	-6	2	-18	-11
- of which manufacturing	22	20	16	-10	6	-1	-4	-1	-7	1	-21	-14
Export order books	2	0	7	0	-1	-17	4	-2	10	-2	-4	-1
- of which manufacturing	5	-11	6	-20	-21	-26	3	-8	4	2	-8	-13
Employment (reported)	22	25	22	18	28	11	12	13	4	12	1	7
- of which manufacturing	26	12	5	-7	18	-2	-2	-3	-10	14	-9	-1
Output (reported)	41	43	40	40	38	33	36	29	24	30	15	20
- of which manufacturing	39	43	24	25	31	20	28	24	31	41	11	16
Costs (reported)	36	38	35	31	26	14	23	19	19	28	31	33
- of which manufacturing	35	48	31	18	21	2	26	16	19	27	50	40
Prices (reported)	7	8	9	8	2	-1	4	-5	-1	1	-3	-3
- of which manufacturing	-3	-5	0	-1	2	-19	-5	-21	-23	-3	-21	-20
Profits (reported)	19	18	23	17	21	13	9	9	7	9	-9	6
- of which manufacturing	17	6	14	8	19	6	-8	5	8	15	-14	-9
Pay (%)	4.1	4.6	4.1	4.1	4.3	4.6	4.0	3.6	3.9	4.3	3.2	3.3
Investment outlook*	Na	Na	Na	Na	Na	Na	Na	12	2	-1	-28	3
- of which manufacturing*	Na	Na	Na	Na	Na	Na	Na	7	1	2	-38	1

* aggregate seriesonly available from 2002Q2