Economic confidence index plummets amid Omicron uncertainty

A key economic measure has fallen sharply over the past month amid concerns about the fallout from the Omicron variant.

The Institute of Directors’ economic confidence index tumbled from -6 in November to -17 in December.

This represents a sharp deterioration from the September to November period and the index is now back to where it was a year ago as the third Covid lockdown was coming into force.

The IoD said there were signs that this nervousness may impact investment decisions. Whereas in November, 33 per cent of company directors said they expected investment to be higher in the next year and 15 per cent expected it lower, by December the corresponding proportions were 31 per cent higher and 18 per cent lower.

The Institute of Directors said business confidence in the UK macroeconomy, which was already fragile, took a tumble in December as the Omicron variant altered consumer behaviour and dashed hopes that the pandemic was behind us.

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Kitty Ussher, chief economist at the Institute of Directors, said: “Business confidence in the UK macroeconomy, which was already fragile, took a tumble in December as the Omicron variant altered consumer behaviour and dashed hopes that the pandemic was behind us.

“We now have significantly more business leaders feeling pessimistic about the UK economy in the next 12 months than feeling optimistic.

“This matters because firms are less likely to undertake investment if the climate feels uncertain, and we need that investment for the economy to grow.

“Separately, we now see widespread evidence of inflationary pressure entrenched throughout the economy with little hesitation on the part of business leaders to pass on increased costs through higher prices. Less than two in ten firms experiencing cost pressures said that they could keep prices the same.”

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