An index which tracks business leaders’ optimism over prospects for the UK economy fell to its lowest ever reading in March.
The Institute of Directors’ data was -76 in March 2026, the lowest point since records began in 2016.
The index was down from -63 in February.
Several underlying indicators also worsened, with costs expectations rising to +88 in March from +84 in February, the second highest reading on record.
In addition, investment intentions fell to -13 from -6, revenue expectations dipped to +13 from +1 and export expectations decreased to +2 from +5.
The survey also asked business leaders about their greatest economic security concerns and 71% were concerned about geopolitical tensions affecting investment, markets or business partners.
Another 69% were worried about energy price volatility, 60% about cyber attacks and 58% about supply chain disruption.
When asked about the conflict in the Middle East, 59% said it has had a negative impact on their organisation so far, with around a third saying the impact was neutral.
Anna Leach, chief economist at the Institute of Directors, said:
“The outbreak of conflict in the Middle East has driven down the confidence of business leaders to a new record low.
Manufacturers are at the sharp end, with 69% reporting a negative impact so far, compared to a cross-sector average of 59%.
“Impacts being reported include sharp increases in fuel and shipping costs, rising material prices, such as petrochemicals, and delivery delays.
“Across all sectors, the general increase in uncertainty is once again delaying decision-making, as many wait to see how the conflict evolves. Financial conditions are reported to have tightened, with investors pulling out of deals. Some offsetting positivity is reported in the renewables sector, where enquiries have understandably increased. But the overall effect is that economic activity has weakened from its already subdued level, while inflationary pressures once again are building.
“More muted changes in underlying data, such as investment intentions and revenue expectations mirror the likewise moderate changes in oil and gas prices despite the unprecedented closure of the Strait of Hormuz.
“The longer and more severe the hit to global energy supplies, the harder businesses and the broader economy will be impacted.
“The government is right to be alert to the risks of another cost shock to the economy, and has been agile in giving vital support to households exposed to heating oil costs. But it should avoid framing price increases as profiteering when many businesses are facing genuine and significant cost pressures from energy, logistics and supply chain disruption.”