The IoD Directors’ Economic Confidence Index, which measures business leader optimism in prospects for the UK economy, ticked up to -66 in December 2025 from the (pre-Budget) November level of -73.
Once business leaders had a little more time to reflect on the impact of last year’s Budget on confidence in their own organisations, it was little changed in December 2025, at -4, from -5 in November.
Most underlying economic measures were either stable or worsened in December compared with directly before the November Budget – with the exception of those for costs:
- Headcount expectations dropped to -14 in December from -8 in November
- Investment intentions dropped to -21 from -17
- Cost expectations fell marginally to +84 from +86
- Export expectations were little changed at +5 from +6
- Revenue expectations were little changed at +8 from +7
Anna Leach, Chief Economist at the Institute of Directors, said: “After months of policy uncertainty at the end of last year, it’s a relief to see business leaders were feeling a little more positive about the economic outlook over the festive season. But this needs to be kept in perspective: the December improvement still leaves confidence around the record lows reached in the first Covid lockdown, and after the last two Budgets. Nonetheless, there is good reason to think that the policy environment could become less volatile in the year ahead. The welcome increase in the headroom against the fiscal rules, and the fact that the OBR will not be assessing those rules in its spring economic update, should mean less policy choppiness.
“The potential for less policy uncertainty will not be enough to materially improve the UK’s economic fortunes. The forward-looking economic measures in this survey were flat or weaker, and the accompanying comments illustrate the material ongoing pressures that business leaders still face. Hiring freezes remain widespread, amidst concern over further cost increases in the latest Budget and the direction of travel for the Employment Rights Bill. Investment continues to be postponed or cancelled as companies conserve cash. When asked about the factors that would have the greatest impact on business confidence in 2026, top of the list were a lower tax burden and scaling back the proposed changes to employment law. More promisingly, improvements in regulation, trade deals with the EU, lower tax complexity and lower business costs were also high up the list – areas where government has stated ambitions and where tangible progress could begin to rebuild confidence.”
The IoD Directors’ Economic Confidence Index measures the net % positive answers from members of the Institute of Directors to the question ‘How optimistic are you about the wider UK economy over the next 12 months?’ on a five-point scale from ‘very optimistic’ to ‘very pessimistic’.
