Confidence among UK business leaders soared after prime minister Boris Johnson’s re-election to its highest level since the EU referendum in 2016.
A poll by the Institute of Directors (IoD) recorded the sharpest upward swing in positive sentiment month-on-month since its records began three-and-half years ago.
Net confidence levels in the UK economy for the year ahead rocketed from a -18% reading in November to +21% in December.
Confidence levels in their own firms also leapt from 26% to 46% among the 952 directors surveyed in the IoD’s ‘Confidence Tracker’ index.
The number of directors who expected their organisations to increase investment in 2020 also ticked upwards.
Many firms have held back on investment as political instability and economic uncertainty have taken a heavy toll on the economy since the Brexit vote.
But Tej Parikh, the IoD’s chief economist, said the Conservatives’ decisive election victory after a period of political deadlock over Brexit had given many leaders “a little more festive cheer.”
“A firm majority government means that business leaders, whatever their personal views, now at least have a framework around which they can put in place plans to invest, hire, and expand,” he said.
Many business chiefs have also expressed their relief since polling day at avoiding a Labour government, amid fears over leader Jeremy Corbyn’s plans on tax, union rights, public spending, nationalisation, and business regulation.
Parikh welcomed “some exciting stocking-fillers” from the new Johnson administration, including promises on lower business rates, skills investment, and higher research and development support through tax credits.
“For the longer-term, ambitious proposals on broadband, infrastructure, and regional growth are music to the ears of many in the business community who want to finally see the dial shift on the UK’s lagging productivity growth,” he said.
But he said continued uncertainty over Britain’s longer-term future “remains a cause for concern.” Many in the business world fear Johnson’s pledge to abandon EU rules less than a year after Brexit leaves too little time to ensure a smooth transition and close trading relationship from 2021.
Parikh added: “Our members’ confidence has proven sensitive to Brexit developments over the past few years, and this is likely to continue during negotiations in the year ahead.”
Business chiefs surveyed raised Britain’s uncertain trading status with the EU as their second most pressing concern, behind current UK economic conditions.
Separate survey data in recent weeks has painted a bleak picture of the UK economy despite record high employment, with political uncertainty and a global economic slowdown hitting output in certain sectors.