Unsurprisingly, though, it is the political uncertainty over the battle to become prime minister and the lengthening shadow of the possibility of a no-deal Brexit that most concern the almost 900 directors who took part in the survey."Change at the top of British politics has rattled businesses leaders," said the IoD, whose report revealed that optimism in the business climate had fallen eight points to minus 28 per cent by last month, bucking a trend that had seen sentiment improve steadily since the turn of the year.

Political uncertainty is worrying business leaders

The IoD’s Confidence Tracker found directors' belief in their own firm’s prospects stayed reasonably resilient, at positive 27 per cent. "However, their expectations for future investment (7 per cent) and employment (16 per cent) remained weak, while anticipated costs remained elevated – explaining their negative outlook for the year ahead," said the report.Aside from concerns over the political and economic future, the biggest factors directors cited as having a negative impact on their businesses were skills shortages – cited by 40 per cent of respondents – and the burden of regulatory compliance.Tej Parikh, chief economist at the IoD, said, “Dealing with political uncertainty is part and parcel of leading a business, but this has been taken to extremes over recent years."With the nature of Brexit still ambiguous and another shakeup of key government personnel in motion, many businesses have been holding back on investing in their staff, operations and technology to the detriment of UK productivity growth.

British exports still resilient

“There is little doubt that the past couple of years have been a maelstrom for firms across the spectrum. It speaks to the underlying strength of the UK’s business leaders and environment that, despite uncertainty, the labour market has continued to confound expectations and exports have been relatively resilient."But there is no room for complacency with policy instability and a lack of continuity eating into our long-term competitiveness.“The Conservative leadership candidates have made some positive noises, but businesses will be eager to get more meat on the bone when it comes to their plans in areas like skills development and infrastructure. The long-standing concerns of enterprise must form a central part of the UK’s growth agenda going forward.”

Directors' rating of negative impacts on their organisations:

UK economic conditions – 55%
Uncertain trading status with the EU – 50%
Skills shortages/employee skills gaps – 40%
Compliance with government regulation – 40%
Global economic conditions – 31%
Business taxes – 30%
Difficulty obtaining payments – 27%
Employment taxes – 25%
Broadband cost/speed/reliability – 24%
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