Business confidence rises to highest level since October budget

Business confidence has climbed to its highest point since before the October budget, largely driven by a delay in US reciprocal tariffs. According to the Institute of Directors’ latest economic confidence index, sentiment among business leaders rose to -51 in April, a significant improvement from -58 the previous month. This marks the most optimistic report since September. The data was gathered from a survey of 648 business leaders conducted between 11 and 29 April.

Key factors behind this positive shift include a reduction in cost expectations and renewed efforts by businesses to bolster recruitment and investment. For the second consecutive month, firms demonstrated increased commitment to expansion, despite facing economic pressures. Analysts noted that the postponed tariffs instigated by former US President Donald Trump have played a substantial role in relieving corporate concerns.

Rachel Reeves, the Chancellor, announced significant fiscal changes in the October budget, which included raising employers’ national insurance contributions from 13.8 per cent to 15 per cent and lowering the payment threshold. Additionally, from April 6, the national minimum wage increased by 6.7 per cent. These measures initially caused sharp declines in confidence and hiring intentions. Businesses had previously been grappling with tighter margins due to rising payroll costs and inflation.

The warning about tariffs during that period amplified the negative sentiment further. However, with President Trump opting to delay the implementation of these reciprocal penalties by an additional 90 days, businesses have had room to manoeuvre, re-evaluate strategies, and stabilise their outlook.

Anna Leach, chief economist at the Institute of Directors, stated that the lessened tariff pressure has provided immediate breathing space for businesses. Still, persistent grievances remain over the perceived lack of supportive government policies to offset rising operating costs. She described the situation as one where “cost demands have surged, but policy actions to foster business growth are still lacking.”

The latest GDP figures from the Office for National Statistics reflected an unexpected growth of 0.5 per cent in February. However, April data from the composite purchasing managers’ index indicated that private sector activity slowed at its quickest rate in 29 months, prompting renewed calls for action. Meanwhile, the International Monetary Fund has downgraded its 2025 UK growth projection to 1.1 per cent from the original 1.6 per cent, reinforcing concerns about future economic resilience.