Investment plans and hiring intentions plunge
The latest Directors’ Economic Confidence Index from the IoD, which measures business leaders’ optimism in prospects for the UK economy, fell in June as the impact of tax hikes filters down into bosses’ confidence levels.
The index fell back to -53 in June 2025, having risen to -35 in May, with investment intentions taking one of the sharpest knocks, coming down to -10 from 0 in May.
Another notable faller was headcount expectations, which fell from -1 to -10.
The findings reflect the souring employment sentiment among bosses evident in a recent poll from the British Chambers of Commerce, another member of the so-called ‘Big Five’ industry lobby groups. Over a third of BCC members said they planned to reduce their headcount to manage with a succession of heightening cost pressures UK firms have been forced to navigate in 2025.
Chancellor Rachel Reeves’ employers’ national insurance tax hike came into effect at the beginning of April, along with the increases to national minimum wage. There is also the looming spectre of a new packaging tax coming into force in Autumn and the government’s flagship employment rights overhaul, which government figures estimate will pile £5bn onto UK firms’ overheads.
Anna Leach, chief economist at the Institute of Directors, said: “Business leaders are finding economic conditions increasingly challenging, both as Autumn Budget tax measures take effect – particularly changes to national insurance, business and agricultural property relief – and from ever increasing global uncertainty.
“While the recently launched strategies from the government tick many boxes, the message coming through is that the tax increases unleashed on business have already undermined the industrial strategy’s ambition “to make the UK the best country to invest anywhere in the world”.