IoD adds to tale of woe

More doom and gloom on the credit crunch today from the Institute of Directors, which reports that business confidence has dropped more in the last quarter than it did in the wake of 9/11. Thanks partly, we presume, to stories like this.

Last Updated: 06 Nov 2012

The proportion of directors claiming to be more optimistic about their company’s prospects is now just 4% higher than the proportion that is less optimistic. Last quarter, the difference was 24%. What’s more, the majority of directors are now pessimistic about the outlook for investment – a 20% negative swing.

The IoD’s chief economist Graeme Leach called it 'a pretty gloomy survey', with a 'worrying' decline in confidence.

But some of the other numbers in the survey suggest we shouldn’t be panicking just yet. The proportion of directors who felt their company was performing well was 73% higher than those who felt they were performing badly – that’s almost the same as last quarter. Only 15% felt the credit crunch had actually had a negative impact on sales, and a measly 6% said their cost of borrowing had gone up. And the majority still expects profits to increase over the next three months.

In fact, businesses seem more worried about the potential future implications, as opposed to current issues. As Leach admitted: “There is a real divide between the actual impact of the financial crisis to date and expectations of what it might bring in the future.”

The problem is that this can become a self-fulfilling prophecy – if businesses are not confident enough to invest, then the chances are that it will hit sales and profits in the long term.

So maybe the best solution is for the doom-mongering IoD to start putting out some slightly more cheery press releases?

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