Seeking clarity: (From left) Britain’s Deputy Prime Minister Angela Rayner, Reeves and the Home Secretary Yvette Cooper at a conference in Liverpool. Experts say Labour could boost growth and investment by clarifying its plans in the next few weeks. — Reuters
LONDON: Business chiefs are the most pessimistic they have been about Britain’s economy since late 2022, when the country was still reeling from the effects of Liz Truss’s short spell as Prime Minister.
The Institute of Directors (IoD) said yesterday that the fear of looming tax hikes and workplace regulations, expected to be brought in by the United Kingdom’s new Labour government, had contributed to the drop in its monthly economic confidence index.
The survey records the percentage difference in respondents who said they’re pessimistic about the economy against those who said they’re optimistic.
It was minus 38% in September, having tumbled since July when more directors said they were optimistic than pessimistic in the aftermath of Labour’s general election victory.
Investment intentions fell close to a four-year low, the survey of 661 respondents also showed.
Anna Leach, the IoD’s chief economist, said Labour could boost growth and investment by clarifying its plans in the next few weeks.
Chancellor of the Exchequer Rachel Reeves will deliver her budget on Oct 30, having said she needs to fill a £22bil financial hole.
The IoD poll is just the latest in a raft of consumer and business sentiment surveys to suggest that the Labour government’s gloomy rhetoric ahead of the budget has dampened confidence.
It threatens to slow an economic recovery that is already running out of steam.
Official data on Monday showed that gross domestic product growth was slower than initially thought in the second quarter at a downwardly revised 0.5%.
Output has also flatlined in three of the last four months with forecasters expecting the United Kingdom to expand at a more pedestrian pace of 0.3% a quarter going forward.
Still, there have been some positive signs. The Organisation for Economic Co-operation and Development recently upgraded the UK’s prospects for growth over the next two years by more than any other Group of Seven country.
Mortgage approvals are increasing, helping to lift house prices.
Extra support for the economy from the Bank of England may be slow to arrive, however, as officials see off any lingering threat from stubborn price pressures.
While the central bank cut interest rates for the first time in over four years in August, it skipped a move in September, and signalled a gradual approach ahead.
Traders are only fully pricing in one more quarter-point reduction by the end of 2024, before more reductions arrive early next year.
Deflation has already reached some retailers, according to the British Retail Consortium (BRC), which said yesterday that prices in September were 0.6% lower than a year ago.
Food prices rose 2.3%, the BRC’s index showed, but non-food prices slipped 2.1%, with furniture and clothes particularly discounted.
Hospitality firms, such as pubs and restaurants, saw lower price increases from their suppliers in August, according to a separate survey by consumer data firm CGA by NIQ. — Bloomberg
