UK businesses vulnerable due to skills shortage, reveals survey

The IoD Directors’ Economic Confidence Index, which measures business leader optimism in prospects for the UK economy, stabilised at -6 in May 2023, little changed from the previous month’s value of -5 and ending a five-month climb from a low of -64 in November 2022

According to the latest data, the current outlook is leaning towards a neutral-to-negative stance, with 39% of IoD members feeling pessimistic about the UK economy in the coming year, compared to 33% who remain optimistic.

When asked about the current challenges faced by their organisations, the top concerns identified by members were the state of the UK economy, skills shortages, and the rising cost of energy. Interestingly, these were the same issues highlighted in the previous survey conducted in February 2023.

However, there is a positive trend in director confidence regarding the future prospects of their own organisations. In May, the index measuring this confidence rose to +44, up from +42 in April. Around 55% of directors anticipate revenue growth in the next year, while only 19% expect a decline, resulting in a net positive outcome of +36, similar to the +37 recorded in April.

In response to the data, industry leaders expressed their views. Steven Mooney, founder and CEO of FundMyPitch, emphasised the importance of providing companies with the necessary investment and support to expand their skillsets, particularly for startups and high-potential SMEs.

Suid Adeyanji, CEO of RiverSafe, highlighted the ongoing priority for businesses to recruit and upskill staff in digital skills and security expertise, especially in the realm of cybersecurity.

Looking ahead, 35% of directors anticipate increasing their workforce in the next year, while 14% expect a reduction, resulting in a net positive outcome of +21, similar to the +22 recorded in April. Additionally, 38% of directors plan to raise levels of investment in their businesses, compared to 17% who anticipate a reduction, resulting in a net positive outcome of +22, demonstrating a steady improvement from +18 in March and +20 in April.

Kitty Ussher, chief economist at the Institute of Directors, noted that confidence has improved in recent months as business leaders have become more optimistic about the UK economy’s outlook. However, Ussher stressed the need for a greater sense that the worst is behind us before confidence can truly rebound.

The IoD Directors’ Economic Confidence Index measures the net positive responses from IoD members regarding their optimism about the wider UK economy over the next 12 months on a scale ranging from ‘very optimistic’ to ‘very pessimistic.’