Business confidence has dropped dramatically since the UK general election, with concerns over political uncertainty and its impact on the UK economy, according to a new survey.
But the poll of company directors shows they have no appetite for another election this year, which they say would have an even more negative impact on the economy.
The nearly 700 members of the Institute of Directors (IoD) who took the survey say the overall priority of the new government must be on reaching a swift trade deal with the European Union.
Members were also keen to see quick agreement on transitional arrangements over the UK’s withdrawal, and clarity on the status of EU workers in the UK.
On the domestic front they want the government to focus on delivering a more skilled workforce and better quality infrastructure.
Stephen Martin, director general of the Institute of Directors, said: “It is hard to overstate what a dramatic impact the current political uncertainty is having on business leaders, and the consequences could – if not addressed immediately – be disastrous for the UK economy.
“The needs of business and discussion of the economy were largely absent from the campaign, but this crash in confidence shows how urgently that must change in the new government.”
Mr Martin called for a cross-party approach on the key issues facing the UK. “The last thing business leaders need is a parliament in paralysis, and the consequences for British businesses and for the UK as an investment destination would be severe.”
He said there was little appetite for a further election this year. “Business leaders are keener to see the new government get to work in Brussels and on the domestic front. Ensuring negotiations start well, and delivering higher quality skills and infrastructure across the country, must be the priority.”
The survey showed that 65% of IoD members believe uncertainty over the make-up of the government is ‘a significant concern’ for the UK economy, with a further 27% describing it as a ‘slight concern’ – a total of 92% citing it as a concern.
There has been a negative swing of 34 points in confidence in the UK economy since the last IoD survey in May. While 20% are optimistic about the UK economy over the next 12 months, some 57% are now either quite or very pessimistic, a net -37 confidence score. This compares with May, when 34% registered their optimism, and only 37% reported pessimism – a net score of just -3.
No appetite for new election
A majority of respondents (59%) believe a further election later this year would be somewhat or very unwelcome, with only 23% saying a further election would be welcome.
Asked to prioritise three policy areas for the new government, 72% chose reaching a new trade agreement with the EU, while half (49%) chose education, skills and training, and a further 35% chose modernising infrastructure.
Asked to choose three areas of Brexit negotiations that should be prioritised by the new government, more than half (58%) cited agreement on rights for EU citizens in the UK and vice versa. In joint second place, negotiating an early agreement on transitional arrangements and securing zero tariffs were both chosen by 38% of business leaders.
Other priorities on Europe were a reciprocal preferential agreement on labour mobility (28%), maintaining the ability to tender for services across the EU (24%), establishing a joint EU/UK committee to manage customs issues (24%), and coming to an agreement on the Irish border (20%).