UK business sentiment rebounds in January after all time low confidence in 2025

Businesses confidence in the economy increased in January following a record low level last year, new Institute of Directors (IoD) research reveals.

Firms’ optimism remains in negative territory, the IoD said, but it jumped to -48 last month, from -66 in December 2025, IoD said.

The December figure was the weakest since May and the -74 score in September 2025, driven by fears around tax rises ahead of the government’s November Budget, was the lowest since the data was first collected in 2016.

Anna Leach, IoD chief economist, said:

“After record weakness last year, January saw a welcome – and fairly chunky – rise in the confidence of business leaders.

“There’s been an improvement across-the-board in the economic measures too, with the strongest improvements in revenue expectations and investment plans. Headcount plans have improved as well, but expectations for both headcount and investment remain in negative territory – marking the longest period of weakness in those areas of business spend in our survey’s history.

“Overall, there’s a sense that, while revenues and general conditions have stabilised, businesses are not yet ready to increase either their capital or labour costs materially.

“The year has begun with a high level of policy activity, including a number of packages designed to support businesses – from backing scale-ups and funding for export growth, to business rates relief for pubs and live music venues. But these welcome moves continue to clash with very significant rises in the cost of doing business in the UK.

“There remains a need to ensure that the full weight of government policy is focused on driving up growth. In particular, we look for further progress in designing-out the risks to employment from the Employment Rights Act, alongside faster action to remove regulatory blockers to growth.”