UK economy rebound hopes gather as City ‘ready to invest’
The UK economy could rebound May as a new business survey has signalled “tentative hope” that Chancellor Reeves can deliver higher growth.
According to Lloyds’ latest sector tracker, two more areas of the economy saw output expand compared to data for April, a month which recorded a 0.3 per cent contract in GDP per official statistics.
Food and drink manufacturing was one of two sectors tracked by Lloyds that experienced growth last month but it was among just four out of 14 sectors which saw output increase.
Input cost inflation also improved slightly while businesses raised their own prices at the slowest rate in five months, researchers said.
Nikesh Sawjani, senior UK economist at Lloyds, said new data showing more sectors reporting an increase in new orders could reflect the UK economy’s rebound.
“While most sectors still face weak demand and rising costs are squeezing margins for businesses, the broader uptick in activity could suggest some early signs of renewed momentum,” Sawjani said.
Financial services boost UK economy
A separate Lloyds survey also suggested that City firms were looking to pump cash into capital expenditure as part of an effort to grow business and drive productivity.
Its annual survey of 100 leaders at banks and other financial service providers showed that more than a third planned to increase capital expenditure, with investment to be targeted at AI and new products.
Over half of leaders expected to grow in the next 12 months in what may be seen as a positive sign for the UK economy given the size of the financial and insurance services sector, which contributed £208bn to the UK economy in 2023 while financial and related professional services employed over 2.4m people, according to TheCityUK.
Lisa Francis, head of institutional coverage at Lloyds, said the fresh data showed UK business leaders were “ready to invest” and embrace new technologies.
“There is a tangible sense of long-term opportunity, with the UK’s financial sector continuing to be well positioned to support sustainable growth.”
Lloyds data also found that three fifths of respondents believe the UK will retain its status as an international financial hub for the foreseeable future, despite tax pressures on investors and post-Brexit hesitancy among a number of firms which have expanded overseas.