Business confidence dips but the UK ‘has what it takes to deliver growth’
Overall business confidence slipped in January, although it was driven down by poorer sentiment about the wider economy rather than about individual businesses.
Overall business confidence dipped two points to 37 per cent, with just over half of businesses positive about their own trading prospects and just under a quarter positive about the wider economy.
Businesses’ optimism about the economy fell for the fourth time in five months, according to Lloyds’ Business Barometer, with the score dropping seven points from December to 24 per cent.
However, three fifths of companies were more optimistic about their output over the next 12 months, with only nine per cent less positive and anticipating less activity.
The net figure for trading prospects, at 51 per cent, was an almost-total rebound from December’s six-month low.
“The figures for trading prospects show promise with businesses signalling more resilience and assurance in their ability to weather perceived economic headwinds,” senior economist at Lloyds, Hann-Ju Ho, said.
“The regional picture is similarly a cause for optimism, with seven regions reporting higher confidence meaning it is the first time since July there has been more confidence rises than falls regionally,” Ho added.
Demand for labour drops marginally
Lloyds’ barometer for headcount dropped one per cent to 32 per cent, its lowest level since June 2024.
However, just under half of the companies that took part – 49 per cent – said they expect to increase their staff numbers in the next 12 months, with only 17 per cent planning to reduce their headcount.
The retail and services sectors both “showed modest improvements this month”, although retail confidence remained low.
Demand for labour in business services and health-related services “remained relatively upbeat”.
However, confidence in hospitality, which will be more affected than other industries by labour tax changes, dipped “notably”.
“With confidence dipping in some sectors this month – particularly in retail and manufacturing – it’s more important than ever that we show our commitment to businesses, providing the right guidance needed to help them grow and thrive,” Paul Kempster, managing director for commercial banking coverage at Lloyds Business & Commercial, said.
“It’s clear the UK has what it takes to deliver growth,” he added.
Fewer businesses – 61 per cent versus 64 per cent last month – said they expected to charge more for goods and services, the lowest level since last September, pre-budget.
Higher prices are expected in low-margin, labour-reliant sectors like retail and hospitality, whose well-documented issues during and post-pandemic have already driven many businesses to the brink.
“Recently, the most significant declines in price expectations have been observed in manufacturing and construction, with smaller decreases in retail and services,” Lloyds said.
“Price expectations, however, remain elevated relative to pre-pandemic levels.”