A lack of confidence in the strength of the UK economy is causing business leaders to hold back on investment.
The Institute of Directors (IoD) has labelled the government as ‘ineffective’ and finds that low confidence is affecting the growth prospects of the British economy.
A survey of 1,277 IoD members reveals that, when quizzed on whether overall GDP growth in 2012 will be lower or higher than the previous year, 52 per cent expect a negative reading, with only 19 per cent forecast a positive one. Some 28 per cent predict it to be the same.
The findings are the latest in the IoD’s Policy Voice studies of business opinion in the UK and also find that 65 per cent of the panel do not think the UK will emerge from recession in 2012.
Some 44 per cent have postponed at least one investment or employment decision on the back of the negative sentiment.
A poll canvassing respondent’s views on the coalition’s reform measures found that the government achieved an ineffective score for every issue ranging from reducing taxation to simplifying employment law to improving energy infrastructure (see table below).
|Reducing tax complexity||8%||69%||-62%|
|Reducing business regulation||8%||68%||-60%|
|Simplifying employment law||11%||62%||-51%|
|Improving the education system||16%||51%||-35%|
|Simplifying the planning system||16%||32%||-16%|
|Improving transport infrastructure||17%||50%||-33%|
|Improving energy infrastructure||9%||58%||-50%|
|Improving ICT infrastructure||12%||46%||-34%|
Vince McLoughlin, partner at business and tax advisory firm Russell New, says that the findings are no surprise and show that the recession is here to stay.
He adds, ‘It’s no good blaming previous governments and regimes anymore – that excuse is long past its sell-by-date.
‘The government is almost pig headedly sticking to its Plan A and its is concerning that it is unable to adjust to economic conditions of its creating when evidence points to the need to react.’
The IoD is now calling on the government to take some ‘bold steps’ to make a real difference to the cost and complexity of doing business in the UK.
Graeme Leach, chief economist at the Institute of Directors, comments, ‘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.’