Output gains show firms are ‘protecting their margins’, Lloyds growth survey says
Growth in a number of sectors shows that firms “are taking steps to protect their margins”, according to a survey of 1,300 companies.
Rachel Reeves’s £20bn increase to national insurance contributions (NICs), which is set to come into effect in April, has left firms unsettled.
But the latest Lloyds UK Sector Tracker has indicated companies are making tough decisions in reaction to costs brought by higher interest rates, inflation and taxes.
The manufacturing sector has made the most radical cost cuts, purchasing fewer raw materials for a third month in a row.
More businesses reported staff layoffs compared to January, the survey also showed.
The tracker also reflected the gloomy outlook for the UK economy as over half of monitored sectors reported a contraction in output for the sixth month in a row.
Demand has also remained broadly stagnant, with only two sectors reporting a rise in orders.
But there were some green shoots of encouragement.
More than a quarter of sectors said output had seen growth, reaching levels not seen since November.
Software and IT services grew at the fastest pace, while tourism and recreation expanded for the first time in ten months in promising news for British pubs and restaurants.
Nikesh Sawjani, a senior UK economist at Lloyds, said the figures generally showed that there was “movement in the right direction”.
“Although uncertainty remains within sectors, businesses are no longer absorbing as much impact – instead, they are taking steps to protect their margins.”
The survey follows an intervention by the Resolution Foundation, a left-leaning think tank, which said falling employment pointed to a recession.
Economists at the Organisation for Economic Co-operation and Development (OECD) slashed UK growth forecasts for 2025.
The Bank of England predicted in February that the UK economy would only expand by 0.7 per cent.
Low growth figures pile pressure on Rachel Reeves to pull a rabbit out of the hat at her Spring Statement to excite business owners and bolster confidence.