Businessconfidence grows, says IoD

UK businesses aremore optimistic about the future than they were three months ago, new figuresout today show. The latest Business Opinion Survey from the Institute ofDirectors (IoD) revealed improvements in business optimism and other 'forwardindicators' including orders and output and profits expectations.

Graeme Leach, ChiefEconomist at the IoD, said:

This latest surveyhints at better times to come, with business optimism, output and profitsexpectations looking much better. But such expectations- data should be treatedwith caution. Expectations tend to be volatile and are often underachieved. Webelieve that there is little indication in these figures that there will be areturn to strong economic growth in the business sector in the near term."

Current indicators in the IoD's third quarter survey werenot as buoyant as the forward indicators. The key indicator of current businessperformance was slightly down in September and other current indicators,including reported output performance, were broadly unchanged compared withJune. The overall picture was, therefore, one of 'marking time' in the thirdquarter but expectations of improvements in the fourth quarter.

The IoD said thatcompany performance actually slipped back in September on Junes historicallyweak figure. Even though the majority of respondents reported that theircompanies were still performing well, it was only a bare majority. The balanceof those companies performing well, minus those performing badly, was just 53%in September compared with 56% in June, 62% in September 2002 and 76% inSeptember 2001.

Performance in the manufacturingsector, however, picked up after dipping badly in the second quarter. The datafor reported output performance, employment growth over the past three monthsand reported profits performance were broadly unchanged in the quarter and, byrecent historical standards, quite weak. Capacity utilisation was marginallylower.

Business optimismimproved again in September. The balance of those companies that were generallymore optimistic about their company prospects (than they were three months ago)minus those that were less optimistic was 35% in September compared with 23% inJune and 6% in March (a quarter which was overshadowed by events in Iraq).Order books improved with a notable pick up in manufacturings export orders.The data on output and profits expectations for the next three months werenoticeably better than in June, but it should be noted that survey expectationsare frequently underachieved and should, therefore, be treated with greatcaution.

Price pressuresremained weak, with many more respondents reporting increased costs (a balanceof 21%) than increased prices (a balance of -5%) - putting a squeeze onmargins. Average pay settlements were 3.6% in September compared with 3.3% inJune.

Ends 17.10.03 No.201

Contact Points:

Richard Taylor, Press Officer
Tel: 020 7451 3264
Mobile and out of hours: 07721 734886

Email: press@iod.com
Web: www.iod.com

David Marshall, Director of Public Affairs
Tel: 020 7451 3263
Mobile and out of hours: 07764 883420

Notesto editors

1. Copies of the fullsurvey available from the Press Office.

2. The Institute ofDirectors is a non-party political independent organisation with around 55,000members. In addition to its wide range of business services, the IoD providesan effective voice to represent the interests of its members to government andkey opinion-formers. It also brings the experience of business leaders to bearon the conduct of public affairs.

3. Previous survey data attached.

The main results ofBusiness Opinion Surveys since 2000 first quarter are shown in the table below(all the data related to balances expect for pay settlements which relate to anaverage):

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

Company performance	75	78	80	76	72	67	61	62	60	53	56	53
- of which manufacturing	59	72	72	76	63	58	51	58	58	57	39	52
Optimism	35	28	28	23	10	40	23	27	15	-6	23	35
- of which manufacturing	22	3	19	16	12	32	12	28	22	-25	15	25
Capacity utilisation	-6	-13	-22	-7	-21	-29	-25	-21	-18	-27	-28	-30
- of which manufacturing	-31	-18	-42	-4	-34	-39	-39	-14	-17	-37	-30	-32
Order books (total)	27	20	9	11	6	7	-2	-6	2	-18	-11	-6
- of which manufacturing	20	16	-10	6	-1	-4	-1	-7	1	-21	-14	-4
Export order books	0	7	0	-1	-17	4	-2	10	-2	-4	-1	-1
- of which manufacturing	-11	6	-20	-21	-26	3	-8	4	2	-8	-13	12
Employment (reported)	25	22	18	28	11	12	13	4	12	1	7	7
- of which manufacturing	12	5	-7	18	-2	-2	-3	-10	14	-9	-1	2
Output (reported)	43	40	40	38	33	36	29	24	30	15	20	20
- of which manufacturing	43	24	25	31	20	28	24	31	41	11	16	22
Costs (reported)	38	35	31	26	14	23	19	19	28	31	33	21
- of which manufacturing	48	31	18	21	2	26	16	19	27	50	40	36
Prices (reported)	8	9	8	2	-1	4	-5	-1	1	-3	-3	-5
- of which manufacturing	-5	0	-1	2	-19	-5	-21	-23	-3	-21	-20	-12
Profits (reported)	18	23	17	21	13	9	9	7	9	-9	6	7
- of which manufacturing	6	14	8	19	6	-8	5	8	15	-14	-9	-6
Pay (%)	4.6	4.1	4.1	4.3	4.6	4.0	3.6	3.9	4.3	3.2	3.3	3.6
Investment outlook*	Na	Na	Na	Na	Na	Na	12	2	-1	-28	3	18
- of which manufacturing*	Na	Na	Na	Na	Na	Na	7	1	2	-38	1	10

* aggregate seriesonly available from 2002Q2