UK business confidence hits record low
UK business confidence has hit a record low, as soaring costs and global uncertainty weigh heavily on company leaders across the country.
The Institute of Directors’ Economic Confidence Index fell to -76 in March, its lowest ever reading, down sharply from -63 in February. In a further sign of deepening pessimism, confidence among directors in their own organisations also turned negative for the first time in recent months, sliding from +1 to -2.
Cost pressures are at the heart of the downturn. The Index’s cost expectations measure reached +88 last month – its second-highest reading on record, surpassed only by September 2025 – as businesses grapple with rising wage bills and broader inflationary pressures. Headcount expectations also climbed, reflecting turbulence across the wider jobs market.
The picture is not uniformly bleak. Both revenue and export expectations improved in March, offering a rare glimmer of optimism. But for many business leaders, those gains are being swamped by the mounting burden of operating costs and the shadow cast by ongoing geopolitical tensions.
Sachin Agrawal, Managing Director for Zoho UK, commented: “UK businesses are being squeezed by significant cost pressures, caused by a perfect storm of geopolitical uncertainty, wage growth, higher input costs, and consequently, a turbulent economy. The result is business leaders becoming cautious, scrutinising spending and rethinking operations to prioritise productivity and ROI in order to tread water.
“Businesses under pressure demand more value from each supplier and every technology tool as they focus on creating stability and trust across partners, customers and employees. Technology infrastructure plays a central part, with smart data and AI investments able to provide real-time and future-looking insights to determine market opportunities and threats, alongside a host of other benefits. This allows business leaders to navigate the uncertainty and plan ahead to strengthen long-term resilience in the face of wavering confidence.”
Geopolitical uncertainty is casting a long shadow over British boardrooms, with nearly three-quarters of business leaders, 71%, worried about its impact on investment, markets, and business partners. More than half, 58%, flagged supply chain disruption as an additional concern.
Looking ahead, directors identified labour costs, including employment taxes, and supply chain inflation as the two primary forces expected to drive costs over the coming year.
Anna Leach, Chief Economist at the Institute of Directors, said: “The outbreak of conflict in the Middle East has driven down the confidence of business leaders to a new record low. Manufacturers are at the sharp end, with 69% reporting a negative impact so far, compared to a cross-sector average of 59%. Impacts being reported include sharp increases in fuel and shipping costs, rising material prices – such as petrochemicals – and delivery delays. Across all sectors, the general increase in uncertainty is once again delaying decision-making, as many wait to see how the conflict evolves.
“Financial conditions are reported to have tightened, with investors pulling out of deals. Some offsetting positivity is reported in the renewables sector, where enquiries have understandably increased. But the overall effect is that economic activity has weakened from its already subdued level, while inflationary pressures once again are building.”
For now, the overriding mood in British boardrooms is one of caution. With record-low confidence, a cost squeeze showing no signs of letting up, and global tensions continuing to cloud the horizon, the question for many business leaders is no longer how to grow – but how to hold on.
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