BUSINESS confidence has plunged as political uncertainty grows in the face of a hung parliament according to the first mayor poll of business leaders since last Thursday’s General Election.
The 700 members of the Institute of Directors (IoD) who were surveyed in the poll experienced a negative swing of 34 points in confidence in the UK economy from its last survey in May.
While 20 per cent are optimistic about the UK economy over the next 12 months, some 57 per cent are now either quite or very pessimistic – a "net confidence" score of minus 37. This compares with May, in which 34 per cent registered their optimism, and only 37 per cent reported pessimism, a net score of just minus three.
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.
Nearly two thirds of IoD members believe uncertainty over the make-up of the government is "a significant concern" for the UK economy, with a further 27 per cent describing it as a "slight concern".
But a majority (59 per cent) believe another election later this year would be somewhat or very unwelcome. Only 23 per cent supported a further election.
Martin said: “If we do indeed see a minority Government, both sides of the aisle must swallow their pride and work on a cross-party basis on the most important issues. 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."
The IoD members are keen to see quick agreement with the EU on transitional arrangements surrounding the UK’s withdrawal, and clarity on the status of EU workers in the UK. On the domestic front, work to deliver a higher skilled workforce and better quality infrastructure is considered vitally important.
When asked to prioritise three policy areas for the new government, 72 per cent chose "reaching a new trade agreement with the EU". Almost half chose education, skills and training, and a further 35 per cent chose modernising infrastructure.
As for three areas of Brexit negotiations which should be prioritised by the new government, more than half, 58 per cent, chose agreement on rights and entitlements for EU citizens in the UK and vice versa. In joint-second, negotiating an early agreement on transitional arrangements and securing "zero for zero" tariffs were both chosen by 38 per cent of business leaders. Some 86 per cent of business leaders felt striking a deal on transitional arrangements was "somewhat" or "very" important.