UK business confidence has stabilised, suffering a marginal decrease for the first time since November 2022 with skills shortages and broader economic conditions cited as pain points.
This is according to data from the Institute of Directors’ (IoD) Economic Confidence Index, a monthly survey measuring over 1,000 business leaders’ optimism in prospects for the UK economy.
The current reading for May of -6 sits below April’s value of -5, indicating a broadly neutral-to-negative stance among business leaders. More than a third (39%) of IoD members feel pessimistic about prospects for the UK economy in the year ahead compared to 33% feeling optimistic over the same time horizon.
UK economic conditions (52%) topped respondents’ list of concerns, closely followed by skills shortages/employee skill gaps (46%) and the cost of energy (45%).
Closing the skills gap
Of particular importance for marketers is business’ leaders worries surrounding skill gaps/shortages. With innovative technology like generative AI taking centre stage across the industry, marketers need to keep-up with this rapid evolution or risk falling out of favour with their organisations c-suite.
Responding to the findings, Sjuul van der Leeuw, CEO of marketing automation platform Deployteq, said: “Once again, the skills crisis is amid the top of the league table of issues hampering growth and causing frustration to business owners. In a rapidly changing digital world, building a workforce adept in AI, coding and analytics is a key differentiator for companies looking to maintain the competitive advantage.”
However, van der Leeuw suggests the onus is also on businesses to give their employees access to the technological tools they need to succeed in an industry that goes at a mile-a-minute.
He said: “Many businesses are still operating expensive and ineffective manual systems across key functions like marketing and sales, meaning staff are under huge pressure to develop their skill-set to keep up with the pace of the market.
“Forward thinking organisations will look to implement the right technology platforms to liberate workers, giving them access to powerful tools to improve their performance and fulfil their potential without having to enrol on a coding course.”
“It will take a greater sense that the worst is behind us before confidence really starts to lift”
Fortunately, businesses are still looking to grow more often then cut back, with 35% expecting to increase their headcount in the next year, compared to 14% who expect to reduce it. Business investment continues to grow too, with 38% expecting to raise levels of investment in their business in the next year, compared to 17% who expect to reduce it. For marketers this highlights an opportunity - successful organisations still see plenty of scope for growth.
Kitty Ussher, Chief Economist at the Institute of Directors, said: “Confidence improved in the first few months of the year as business leaders began to believe that the outlook for the UK economy, although difficult, was not as bad as they had previously been led to believe. Our confidence index is now stabilising at a just-below neutral stance, similar to that recorded before the invasion of Ukraine.
“Although investment intentions are picking up and our members are broadly planning for growth it will take a greater sense that the worst is behind us before confidence really starts to lift.”