Confidence boost for businesses as economy reopens

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Date: 6 April 2021

A waiter cleans a table ready to reopen after lockdown

Directors' optimism in the economy is at its highest level since just after the 2019 General Election, according to new data from the Institute of Directors.

As plans to reopen non-essential shops, gyms, hairdressers and pubs remain on track for 12 April, it seems company directors are feeling more positive than they have for a long time. According to the Institute of Directors (IoD), the planned reopening of the economy and the Budget have boosted business spirits.

Its Spring 2021 Confidence Tracker reveals that:

  • Directors' optimism in the economy has moved further into positive territory since February (+14, up from +5);
  • 62% of company directors polled said the Budget had improved prospects for the economic recovery;
  • Net investment and hiring intentions for the year ahead have also picked up (+19 and +18 respectively).

"After an enduring year defined by challenge after challenge, the clouds are finally parting for businesses," said IoD chief economist Tej Parikh.

"The roadmap to reopen the economy, the successful vaccine rollout and the Budget have all buoyed directors' confidence in the first quarter. Having plumbed to new depths of pessimism amidst the pandemic and Brexit uncertainty last year, firms are now embracing a cautiously optimistic outlook for the year ahead."

Extensions to furlough and other government relief schemes have also "staved off fears of an impending cliff edge in support measures" he added. "As the roadmap progresses, firms can now rescale over the spring and summer months with the cushion of the government's economic package still beneath them."

However, challenges remain. Asked which factors are having a negative effect on their business, directors cited:

  • Coronavirus (62%);
  • UK economic conditions (51%);
  • New trading relationship with the EU (42%);
  • Global economic conditions (38%);
  • Compliance with government regulation (34%).

"Despite the improved economic outlook, policymakers and business leaders should take care not to slip into complacency," warned Parikh "The government should be on hand to extend cashflow support if the roadmap faces speedbumps, and firms will need ongoing help to navigate new trading terms with the EU. Businesses meanwhile should continue to invest in their skills and digital capabilities to adapt to the demands of the post-pandemic economy."

With confirmation from prime minister Boris Johnson that phase two of the roadmap out of lockdown will go ahead for England on April 12, Claire Walker, co-executive director of the British Chambers of Commerce (BCC), said: "Many firms will be breathing a huge sigh of relief that they will soon be able to reopen their doors to customers. The last year has taken a heavy toll on firms across the country and they will be counting down the hours until they can begin trading and rebuilding their businesses.

"The latest BCC Quarterly Economic Survey has shown that businesses are becoming more optimistic about the future. But that confidence is fragile and absolute clarity and honesty will be needed every step of the way over the weeks ahead, so that companies have a fighting chance to rebuild."

Written by Rachel Miller.

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