business

IoD: Business Confidence Improves Despite Rising Concerns About Iran Conflict

The IoD Directors’ Economic Confidence Index, which measures business leader optimism over prospects for the UK economy, rose to -53 in May 2026 from -64 in April.

Business leader confidence in their own organisations also rose, to +23 in May from +8 in April. This is the indicator’s highest reading since August 2024 (+23).

The majority of the underlying indicators also improved:
Investment intentions rose to -1 in May from -9 in April
Revenue expectations rose to +27 from +17
Export expectations rose to +9 from +3
Cost expectations fell marginally to +84 from +85
Headcount expectations remained unchanged at -3

Of the factors having a negative impact on businesses (asked quarterly):
Concerns about global economic conditions was the area that saw the biggest increase in citations, with 43% of businesses indicating they were having a negative impact, up from 33% (moving to 4th in the negative impact rankings from 7th)
UK economic conditions (75% of businesses) remained the most significant reported concern, relatively unchanged from 77% in February 2026
Employment taxes (54%) and business taxes (47%) continued to be of significant concern but fell from 63% and 54% respectively
Cost of energy remained stable at 35% (from 34% in February)

Of the global risks that were most concerning for business leaders (asked quarterly):
Concerns over a global economic slowdown rose to the top of the rankings, with two thirds of businesses (65%) indicating that it was one of the three most significant global risks, up from 52% in February
Concerns over geopolitical tensions remained high (51%, down slightly from 52%) as one of the top three risk factors
Concern about cybersecurity remained in third place at 45%, down from 49%
Concern about the US administration fell to 30% from 39%

In May, optimism among business leaders for the UK economy over the coming year improved for the second successive month. However, economic conditions remained challenging with three quarters of firms putting the UK economy as the top factor having a negative impact on organisations. Cost expectations remained elevated and firms continued to be reluctant to expand, amidst widespread frustration with tax and regulatory burdens, particularly employment. Investment plans improved, but that simply left firms on balance neither increasing nor decreasing investment spending plans – somewhat weaker than the series average. Meanwhile headcount plans remained in slightly negative territory for the year ahead.

Amidst what feels like an eery calm in broader business conditions, it’s the quarterly questions on global risk which highlight rising concern over the Iran conflict. Two thirds of business leaders put a global economic slowdown at the top of their risk list, with half worried about geopolitical risks, while cybersecurity concerns also remained elevated. With cost pressures likely to rise further in the coming months and financial conditions set to tighten, operating conditions will become more challenging for business. To support businesses in driving the resilient growth needed, urgent action is needed to tackle the rising cost of doing business in the UK, through bringing down energy and regulatory costs, and reforming business rates.

Anna Leach, Chief Economist at the Institute of Directors

The IoD Directors’ Economic Confidence Index measures the net % positive answers from members of the Institute of Directors to the question ‘How optimistic are you about the wider UK economy over the next 12 months?’ on a five-point scale from ‘very optimistic’ to ‘very pessimistic’.

Full Results
615 responses from across the UK, conducted between 15-27 May 2026.13% ran large businesses (250+ people), 16% medium (50-249), 25% small (10-49 people), 32% micro (2-9 people) and 17% sole trader and self-employed business entities (0-1 people).

How optimistic are you about both the wider UK economy and also your organisation over the next 12 months?

	Very optimistic	Quite optimistic	Neither optimistic nor pessimistic	Quite pessimistic	Very pessimistic	Don't know
Wider UK economy	0.8%	11.1%	22.9%	42.9%	22.3%	0.0%
Your (primary) organisation	6.8%	37.6%	34.1%	15.3%	5.7%	0.5%

Comparing the next 12 months with the last 12 months, what do you believe the outlook for your organisation will be in terms of:

	Much higher	Somewhat higher	No change	Somewhat lower	Much lower	Donât know	N/A
Business investment	3.4%	24.1%	41.3%	20.7%	8.1%	0.7%	1.8%
Costs	19.8%	67.0%	9.1%	2.1%	0.3%	0.2%	1.5%
Exports	3.1%	14.0%	28.3%	5.7%	2.3%	0.8%	45.9%
Headcount	2.1%	20.2%	49.3%	21.8%	3.3%	0.5%	2.9%
Revenue	7.0%	44.6%	22.3%	20.5%	4.1%	0.5%	1.1%
Wages	5.7%	46.0%	37.4%	6.3%	1.3%	0.5%	2.8%

Which of the following, if any, are having a negative impact on your organisation?

UK economic conditions	74.6%
Employment taxes	53.5%
Business taxes	47.2%
Global economic conditions	43.3%
Cost of energy	35.1%
Compliance with government regulation	35.0%
Skills shortages and/or labour shortages	26.3%
Trading relationship with the EU	19.0%
Transport cost/speed/reliability	18.0%
Cost/availability of finance	16.6%
Difficulty or delays obtaining payment from customers	15.8%
Supply chain disruption	13.5%
Broadband cost/speed/reliability	8.1%
Other	7.3%
None	1.6%

Which of the following global risks are the most concerning for your business? Please choose up to three

Global economic slowdown	64.9%
Geopolitical tensions	50.9%
Cyber security risks	44.7%
The US administration	29.6%
Misuse of artificial intelligence	29.4%
Global trade war	23.6%
Extreme weather events	6.5%
Global health risks	6.2%
Other	5.2%
None	2.9%

	Sunrise	3:31AM
Sunset	8:39PM