British Prime Minister Theresa May departs after speaking at a press conference after attending a special session of the European Council over Brexit on November 25, 2018 in Brussels, Belgium.

Business leaders' confidence in the British economy has sunk to its lowest level in more than 18 months as the risk of a no-deal Brexit in a little over three months grows, the Institute of Directors (IoD) said on Thursday.

The group, which represents business directors and leaders, said its confidence tracker briefly reached positive territory earlier this year when there was agreement on a Brexit transition period, but had fallen steadily since April and hit its lowest level this month.

Prime Minister Theresa May faces deep opposition from both her own lawmakers and opposition parties to the divorce agreement she has negotiated with the EU, raising the risk of a "no-deal" departure, something that could hurt the economy.

IoD senior economist Tej Parikh said there was no doubt that the tumultuous Brexit process was having a damaging impact on firms' outlooks.

"Business leaders are looking ahead to the new year with trepidation about the economy," he said.

"While we saw cautious optimism emerging when the Brexit talks appeared to be moving towards a transition period after March 2019, that has utterly dissipated now.

"The prospect of a no-deal in the near future will be weighing heavily on directors' minds."

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