UK business confidence has recovered to its highest level since before Labour’s October budget when new taxes pushed many firms to reconsider their growth plans.
The Institute of Directors’ (IoD) Economic Confidence Index moved to –35, its highest level since last August and up from –51 in April.
The findings echoed the Lloyds Business Barometer last week which noted a rise in sentiment amid a recovery in financial markets and easing trade tensions.
“It’s good to see a recovery in business confidence underway, with our headline measure moving up three months in a row to its highest since August 2024,” said Anna Leach, chief economist at the IoD.
The improvement was mainly driven by better revenue, export, and wage expectations, plus the UK’s new trade deals with the US and the EU.
However, firms continued to warn of further job cuts and Leach said any more tax rises could knock the recovering optimism off course.
She added businesses are more concerned about a global economic slowdown and cybersecurity risks after a number of high-profile attacks on retailers.
Lloyds’ business survey noted a “sharp increase in economic optimism” with 40% of businesses now expecting to increase their staffing levels
Hann-Ju Ho, senior economist at Lloyds Commercial Banking, said the overall trend was an important signal for potential growth and resilience in the business community and wider economy.
“While we know that fluctuations do occur month on month and the global economic outlook remains uncertain, this month’s increase in confidence is an encouraging sign,” he said.
However, retail confidence bucked the trend with confidence falling to its lowest level since January 2025.
The Confederation of British Industry (CBI) struck a more pessimistic tone on Monday morning, warning that companies expect to cut production and hiring over the next three months to deal with cost pressures.
Alpesh Paleja, deputy chief economist at the CBI, said there was “little sign of summer cheer in our surveys”.
“Against this backdrop of uncertainty, private-sector firms are looking to the government for decisive action to restore business confidence and boost growth.”
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