New research reveals ‘significant shift in businesses’ infrastructure priorities’

Research carried out by the Institute of Directors (IoD) has revealed that business leaders’ infrastructure priorities have ‘shifted’ compared with the situation at the start of the current parliamentary term.

According to the IoD, the road network is now seen as the most important area for infrastructure investment. In a recent survey carried out by the business group, this was prioritised by 66% of directors compared to 54% in 2019.

Businesses also emphasised the need to develop renewable energy generation and improve the existing rail network.

Commenting on the research, Roger Barker, Director of Policy at the IoD, said: ‘Infrastructure is the backbone of a successful economy, and a prerequisite for economic growth and productivity. However, investment needs to be targeted in the right places. Directors’ assessment of what will deliver the greatest return for the UK economy has evolved over the last five years.

‘Directors are increasingly seeking solutions to their everyday transport needs rather than grandiose projects, which are costly and difficult to deliver. They also expect government to support them in their shift to more environmentally sustainable business models, with a particular focus on renewable energy generation and the achievement of net zero.’ 

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UK economy exits recession as interest rates held

The UK economy grew by 0.6% between January and March, according to figures from the Office for National Statistics (ONS).

It means that the country has officially emerged from recession with growth led by the services sector.

Production also grew while the construction sector shrank.

It follows the Bank of England’s decision to hold interest rates at 5.25% for the sixth month in a row.

The Bank signalled that rate cuts should follow later this year.

Ben Jones, Lead Economist at the Confederation of British Industry, said: ‘Back-to-back increases in output over the first months of this year suggest the UK is now on the road to recovery. With falling inflation boosting households’ spending power, as well as opening the way for a reduction in interest rates in the months ahead, the economy should be able to sustain some momentum through the year.

‘But a consumer-led recovery could prove short-lived without more determined action to tackle the long-standing problem of weak productivity growth, which ultimately sets the UK’s economic speed limit. 

‘Firms want to see action that could help support investment and cut costs which, includes extending full expensing to leased and rented assets, and a business tax roadmap to give firms the certainty and confidence they need to plan ahead and invest in a vibrant UK economy.’

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UK economy will see slowest growth in G7 next year

The UK will see the slowest growth of the G7 nations next year, the Organisation for Economic Co-operation and Development (OECD) has warned.

OECD forecasts show that UK GDP will rise by just 1% in 2025, well below predictions for other G7 nations.

The OECD said that economic growth in the UK will also be ‘sluggish’ this year.

It expects the UK economy to grow by 0.4% this year, downgraded from its previous prediction of 0.7%. According to the OECD, only Germany will see slower economic growth this year.

Certain measures ‘could help to lower fiscal pressure’, the OECD said, outlining the government cuts to National Insurance and its Tax-Free Childcare (TFC) scheme as being potentially beneficial.

However, the OECD said that any increase in public spending should happen only after interest rates have been lowered. It predicted that the Bank of England will reduce the cost of borrowing from 5.25% to 3.75% by the end of next year.

The OECD report said: ‘Fiscal prudence is required as inflation remains above target, and spending is to be directed towards supply enhancing investment, including infrastructure, the National Health Service, and adult skills

‘Proceeding with the childcare reform will help tackle economic inactivity, but requires contingent planning to address potential bottlenecks, in particular likely staff shortages.’

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UK economy returns to growth

The UK’s economy returned to growth in January, according to the latest data from the Office for National Statistics (ONS).

The economy grew by 0.2% during the first month of 2024 following a fall in output during the previous month.

The economy was boosted by stronger sales in shops and online and more construction activity in January.

The ONS said the services sector led the bounce back after retailers struggled to draw in shoppers in December.

David Bharier, Head of Research at the British Chambers of Commerce (BCC), said: ‘Today’s data, showing an estimated 0.1% decline in GDP in the three months to January, is further evidence that the UK economy remains in a precarious state.

‘However, estimated growth of 0.2% in January may indicate the 2023 technical recession is over.

‘Businesses are clear about the factors that are holding back growth – high inflation, high interest rates, skills shortages, a lack of infrastructure investment and trade barriers with the EU.

‘Last week’s Budget saw some positive measures for businesses, including an increase to the VAT registration threshold. However, the statement was not a game changer and the UK stills lacks a clear industrial strategy to unlock long-term growth.’

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Chancellor ‘considering national insurance cut’ in Spring Budget

Reports have suggested that Chancellor Jeremy Hunt is considering cutting national insurance in the Spring Budget on Wednesday 6 March.

According to economists, the Chancellor is seeking to make ‘smart tax cuts’ aimed at boosting the UK economy.

According to the BBC, Mr Hunt is considering slashing national insurance in the Budget on Wednesday, rather than income tax.

During the 2023 Autumn Statement, the Chancellor announced a significant cut in national insurance which saw the main rate reduced from 12% to 10%. The BBC stated that an additional cut to national insurance of just 1% would cost £4.5 billion per year.

However, the Institute for Fiscal Studies (IFS) has warned that tax cuts should be implemented at a later date. Carl Emmerson, Deputy Director at the IFS, said: ‘We don’t think we should be implementing certain tax cuts now, essentially that are paid for by uncertain spending cuts that might never be delivered.

‘There’s lots of problems in our tax system – we need genuine tax reform – and if we want growth-friendly tax cuts we should be looking at stamp duty on purchases of properties and stamp duty on purchases of shares.’ 

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UK economy shrank in October

The UK economy shrank by more than expected in October, with higher interest rates and bad weather taking their toll, according to the latest figures from the Office for National Statistics (ONS).

The economy shrank by 0.3% during the month after growth of 0.2% in September.

Retail and tourism were hit by severe weather in October as Storm Babet lashed the UK.

Most economists had predicted that the economy would shrink by just 0.1% that month, but the services, manufacturing and construction sectors all contracted.

Ben Jones, Lead Economist at the Confederation of British Industry (CBI), said: ‘Businesses are gearing up for another tough year ahead. Faced with weak demand and ongoing pressures on costs, companies are taking a hard look at their overheads and pursuing a cautious approach to staffing levels and investment.

‘With an election on the horizon, it’s important to avoid adding any extra layers of uncertainty to the business environment. Seeking as much consensus as possible on growth-enhancing measures such as speeding up planning and grid connectivity or policies to encourage innovation and tech adoption would help to build confidence and unlock further investment.’

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Research finds UK is ‘hub for innovation’

Research carried out by YFM Equity Partners has suggested that the UK is a ‘hub for innovation’, with UK entrepreneurs generating £950 billion in revenue each year.

The research stated that the number of patents granted by the Intellectual Property Office serves to highlight the vast amount of new technology and innovative products in development across the UK.

According to the data, a significant number of entrepreneurs are utilising new and developing technology such as Artificial Intelligence (AI). 35% of those polled said that their firm already makes use of AI, whilst an additional 40% said they are considering using it.

Commenting on the research, Jamie Roberts, Head of Investments South at YFM Equity Partners, said: ‘As their enormous contribution shows, entrepreneurs are the beating heart of the UK economy, and it is imperative that the UK government creates an environment where these businesses can thrive.

‘The government has repeatedly shown its commitment to fostering innovation in the UK and has also highlighted the importance of innovation to a healthy and growing economy.

‘However, [the] research shows that SMEs need better support, particularly when it comes to accessing finance to back their numerous and varied ideas.’ 

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Directors’ confidence ‘stuck in a rut’, IoD finds

The Institute of Directors (IoD) has found that confidence amongst directors in the UK is ‘stuck in a rut’.

The IoD’s Economic Confidence Index, which measures business leader optimism in relation to the UK economy, rose slightly last month from a negative reading of -25 in October to -21 in November.

It also found that business leaders are ‘more optimistic about prospects for their own organisations than they are for the economy as a whole’. Skills shortages and economic conditions remain the top two concerns for business leaders, with energy costs and business taxes also presenting significant challenges.

Roger Barker, Director of Policy at the IoD, commented: ‘Business leaders’ confidence in the UK economic prospects remains firmly in pessimistic territory, even if they are somewhat more optimistic about the prospects for their own organisations.

;Although the Autumn Statement offered succour to business in the form of permanent full expensing, business leaders are still searching for reasons to jumpstart their confidence for next year.’ 

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UK economy stagnates in third quarter of 2023

The UK’s economy failed to grow between July and September compared to the previous quarter, according to the latest data from the Office for National Statistics (ONS).

The figures from the ONS show the UK economy grew by 0.2% in September and mean the UK will avoid a recession this year.

The ONS said that the latest growth figures showed a subdued picture across all sectors of the economy.

The services sector saw a small decline over the three-month period, while the manufacturing sector saw slight growth.

Ben Jones, Lead Economist at the Confederation of British Industry (CBI), said: ‘Forecasts for the UK economy have generally been edging down recently and the latest growth figures lived up to this gloomier view of near-term prospects.

‘It’s clear that higher interest rates are starting to bite, and demand has become less resilient.

‘The Bank of England’s latest forecasts make for particularly grim reading, with the economy expected to be flat next year and before growing at feeble rates in both 2025 and 2026. But action from the Chancellor in the Autumn Statement . . . could change that outlook.’

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Interest rates held at 5.25%

At its latest meeting, the Bank of England’s Monetary Policy Committee (MPC) held the base interest rate at 5.25%.

The latest decision marks the second time in a row that interest rates have been held at 5.25% – their highest level in 15 years.

According to the Bank, the UK economy won’t see any growth until 2025. However, the Bank also expects inflation to fall ‘sharply’ over the coming months.

Responding to the latest interest rate decision, David Bharier, Head of Research at the British Chambers of Commerce (BCC), said: ‘[The] decision to again hold the interest rate at 5.25% will allay some concerns of the businesses we speak to that are unable to stomach further rises.

‘Our research has shown that interest rates have grown as a key issue among companies. This is especially true for smaller firms and those in consumer facing sectors who have seen rising borrowing costs and decreased customer demand.

‘The BCC’s Quarterly Economic Survey for quarter three found that 45% of all firms cited interest rates as a concern. With inflation set to ease further and GDP and labour market data indicating the economy is cooling, the Chancellor’s Autumn Statement must set out a plan for growth.’

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