Mixed report from Institute of Directors

Business optimism has fallen sharply over the last few months - although there is some good news in the latest research from the Institute of Directors (IOD).

Whilst economic worries from the Government and the Bank of England are highlighted in the Institute’s latest quarterly Business Opinion Survey (BOS) there is no evidence that employers will be cutting jobs.

In fact, a balance of 36% of companies expects employment to increase in 2008.

However, the collapse in optimism is significant because a sharp swing in business investment could potentially turn an economic slowdown into a recession.

Despite the tail-off in future optimism, actual performance remains strong with the proportion of directors stating that their company was performing well, versus those stating it was performing badly increased by four per cent on the previous survey.

Commenting on the results, Graeme Leach, chief economist at the IoD said that this is a tricky survey to interpret. Headline investment intentions have fallen-off a cliff but the outlook is not quite as gloomy as it first appears.

A positive balance of 32% of companies expect to increase investment in 2008 and so the bottom line seems to be that, despite the tail-spin in confidence, companies still envisage some increase in investment this year.