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Updated January 3rd, 2024 at 09:02 IST

UK business leaders express growing pessimism about economic outlook

Governor Andrew Bailey and other top officials have indicated a preference for keeping borrowing costs elevated to mitigate inflationary pressures.

Reported by: Business Desk
UK economy
UK economy | Image:Unsplash
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British business executives are increasingly pessimistic about the trajectory of the country's economy, leading to a cautious approach in making investment decisions, according to a survey released on Wednesday. 

The Institute of Directors' (IoD) confidence index, which gauges the gap between optimistic and pessimistic business leaders, declined to -28 in December from -21 in November, marking a gradual descent since June.

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While expectations for business investment, costs, wages, and headcount remained relatively unchanged, company leaders exhibited a more positive outlook for their individual businesses, with optimism for revenue and export growth on the rise.

Roger Barker, policy director at the IoD, noted that sentiment among directors had remained subdued in the second half of 2023, primarily due to the impact of higher interest rates on the economy. Despite some improvements in aspects of the business environment, particularly regarding inflation, these changes have yet to significantly influence business decision-making, Barker added.

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The IoD urged the Bank of England to initiate interest rate cuts early in 2024, citing a need for a boost to business amidst abating inflationary pressures. Barker stressed that with inflation pressures easing, businesses require support to contribute meaningfully to economic growth in 2024.

The Bank of England had raised the Bank Rate 14 consecutive times from December 2021 to August of the following year, maintaining its benchmark rate at a 15-year high of 5.25 per cent since then. 

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Governor Andrew Bailey and other top officials have indicated a preference for keeping borrowing costs elevated to mitigate inflationary pressures.

The IoD survey, based on 703 responses from companies polled between December 14 and December 29, provides insights into the sentiments of business leaders amid the evolving economic landscape.

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(With Reuters Inputs)

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Published January 3rd, 2024 at 09:02 IST

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