The Institute of Directors said sentiment had “fallen off a cliff” in September, contributing toward fears that the UK was headed for a dose of 1970s-style stagflation. 

The IoD’s warnings came as Bits continued to panic buy petrol and diesel and road while road traffic fell considerably. Online clothes retailer Boohoo said its profit margins were being tightly squeezed by the higher shopping costs.

The IoD said that the sharp drop in business confidence from +22 points to -1 points in September means a return to February’s pessimism when the UK entered into its third lockdown and many businesses were forced to once again close their doors. 

The IoD’s chief economist, Kitty Ussher, said: “The business environment has deteriorated dramatically in recent weeks. Following a period of optimism in the early summer, people running small and medium-sized businesses across the UK are now far less certain about the overall economic situation and the IoD Directors’ Economic Confidence Index fell off a cliff in September.

“A higher proportion of our members expect costs to rise in the next year than expect revenues to rise. This is not helped by the government’s recent decision to raise employers’ national insurance contributions, which acts as a disincentive to hire just when the furlough scheme is ending.”

In the second quarter of this year, the Office for National Statistics upgraded its growth estimates for the UK from 4.8% to 5.5%. However, activity has slowed down since the middle of the year due to rising infection rates, the “pingdemic”, and supply chain shortages.