News

August 24, 2012

IoD members want Coalition to do more to stimulate the UK economy

Responding to an Institute of Directors (IoD) Policy Voice survey of 1,277 members, 65% believe there is "a low or zero probability of the UK emerging from recession in 2012", with only 7% believing there is a "high or very high" probability of the recession ending in 2012. More optimistically, in the second half of 2012, 52% expect growth to be higher than in the first half (but 22% expect less growth).

According to the IoD: "This lack of confidence in short-term economic performance has knock-on effects on how business behaves". Some 44% of business leaders polled confessed to postponing at least one major investment or employment decision in 2012 because of "uncertainties in the business or economic environment".

Coalition reforms to taxation, regulation, education and infrastructure were largely seen as "ineffective in every area — though for some policy areas, reform can take several years to take effect", the IoD conceded. However, the government's attempt to reduce tax complexity was viewed most ineffective.

Graeme Leach, chief economist at the IoD, said: "Business is battening down the hatches in the expectation that the recession will continue for the rest of the year. That is bad news for the economy at large, because decisions to invest money or take on more staff are being postponed until things look up.

"Low confidence leads to delayed decisions, and delayed decisions further undermine economic confidence — it's a vicious cycle. At the same time, the government's reform agenda is pointing in broadly the right direction, but the overwhelming opinion of our members is that they are doing too little, too slowly. If the Coalition wants to break this cycle of low economic confidence, then they need to take some bold steps that will make a real difference to the cost and complexity of doing business in the UK."

Speaking to BBC News in response to the survey, the government said it had already set out a "comprehensive strategy to achieve strong, sustainable and balanced growth, including important reforms to reduce the burden of regulation". Cuts in regulation, it said, had saved businesses £850m since last year, while it retained a "clearly demonstrated commitment to simplifying the tax system".

Commenting for the opposition, shadow business secretary Chuka Umunna said: "Month after month the country's businesses have been telling the government it is not doing enough to lift our economy out of this double-dip recession created in Downing Street. Out of touch and ineffective ministers refuse to listen, which is why they're losing the confidence of business."