Business confidence showed a modest improvement in December, but employers continue to rein in hiring and delay investment amid ongoing cost pressures and regulatory uncertainty, according to new data from the Institute of Directors.
The IoD’s Directors’ Economic Confidence Index, which tracks business leader optimism about the wider UK economy, rose to -66 in December, up from -73 in November, which had been measured immediately before the Budget.
However, confidence in respondents’ own organisations remained effectively flat at -4, compared with -5 the month before, highlighting that any improvement in sentiment has yet to translate into stronger business plans.
Hiring freezes and delayed investment persist
Forward-looking indicators in the survey suggest businesses remain cautious, with headcount expectations weakening to -14, from -8 and investment intentions falling to -21, from -17.
The data suggests that while the immediate post-Budget uncertainty has faded, structural concerns around employment costs, taxation and regulation continue to weigh heavily on decision-making.
Anna Leach, Chief Economist at the IoD, said that while the December uptick was welcome, it should not be overstated.
“After months of policy uncertainty at the end of last year, it’s a relief to see business leaders feeling a little more positive over the festive season,” she said. “But confidence remains close to the record lows reached during the first Covid lockdown and after the last two Budgets.”
Leach noted that increased fiscal headroom and the decision not to assess fiscal rules at the spring OBR update could reduce short-term policy volatility. However, she warned this alone would not be enough to materially improve growth prospects.
Hiring freezes and cancelled capital spending were frequently cited in free-text responses, reflecting widespread cash preservation strategies across the private sector.
The findings underline a fragile recovery in sentiment, but one that remains highly sensitive to policy choices in 2026.