Increased political uncertainty following the outcome of the UK general election has resulted in a dramatic drop in business confidence, according to survey of company directors.
While 20% of respondents said they were optimistic about the UK economy over the next 12 months, some 57% are pessimistic, giving a net confidence score of -37, compared with -3% in May.
The research, carried out by the Institute of Directors (IoD), also shows that 92% think uncertainty over the make-up of the government is a concern for the UK economy, with 65% saying it is a significant worry.
"It is hard to overstate what a dramatic impact the current political uncertainty is having on business leaders, and the consequences could be disastrous for the UK economy," IoD director general, Stephen Martin, said.
"The needs of business and discussion of the economy were largely absent from the campaign, but this crash in confidence shows how urgently that must change in the new government."
The survey gathered responses from 686 IoD members, ranging from start-up entrepreneurs to multinational CEOs, with 59% saying another election this year would be unwelcome, compared with 23% who think it could be positive.
Business leaders said an agreement on rights and entitlements for EU and UK citizens, a deal on transitional arrangements, and securing 'zero for zero' tariffs, should be the main priorities in Brexit negotiations.
When asked to prioritise three policy areas for the new government, 72% chose reaching a new trade agreement with the EU, 49% said education, skills and training, and 35% picked modernising infrastructure.
In addition, 76% say political uncertainty is either a significant or slight concern for their organisation, with 40% confident for their business this year, and 23% pessimistic.
"If we do indeed see a minority government, both sides of the aisle must swallow their pride and work on a cross-party basis on the most important issues," Martin continued.
"The last thing business leaders need is a parliament in paralysis, and the consequences for British businesses and for the UK as an investment destination would be severe.
"Saying this, there is also little appetite for a further election this year, and indeed business leaders are keener to see the new government get to work in Brussels and on the domestic front.
"Ensuring negotiations start well, and delivering higher quality skills and infrastructure across the country, must be the priority."
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