Business confidence rebounds to nine-month high
Business confidence bounced back in May, rising by 11 points to 50%, according to the latest Lloyds Business Barometer. The increase in confidence more than offset April’s 10-point decline and marked the highest score in nine months, matching the level in August 2024. The increase was driven by a boost in economic optimism which rose 16 points, along with an improvement in trading prospects, amid signs of progress in potential global trade agreements.
Trading Prospects & Employment Insights
Businesses’ own trading prospects improved by six points to 56%, with businesses also reporting an increase in their expected staffing levels, up three points to 40%. Pay expectations increased marginally this month, with the number of firms anticipating 3% or higher average pay growth up three points to 34%.
Hann-Ju Ho, senior economist, Lloyds Commercial Banking, said: “The rebound in business confidence suggests that firms might be in a stronger position for the next quarter. The rise in confidence is driven by a sharp increase in economic optimism, reflecting the recovery in financial markets amid the easing of global trade tensions.
“Equally as encouragingly is the fact that trading prospects, wage expectations and hiring intentions also saw improvements this month. The positive trends in these metrics are important signals for potential growth and resilience in the business community and the wider economy. While we know that fluctuations do occur month on month and the global economic outlook remains uncertain, this month’s increase in confidence is an encouraging sign.”
Sector Insights
Construction firms confidence rose to a nine-month high of 56%, while those in the service sector reported a one-year high of 54%. Manufacturing confidence also rose by two points to 40%. However, retail confidence fell by five points to 40%, the lowest level since January this year.
Regional Insights
Nine of the UK’s 12 regions and nations reported stronger business confidence, with the biggest rises being Northern Ireland, the East Midlands and the South West, with sizeable gains also seen in Wales and Yorkshire & the Humber.
Paul Kempster, managing director for Commercial Banking Coverage, Lloyds Business & Commercial said: “The jump in business confidence for our regions and nations is encouraging. It’s great to see that across many metrics, businesses are more hopeful for the future and are backing themselves for success in 2025.
The East Midlands in particular saw the highest confidence levels at 66%, the highest the region has seen since 2018. As business confidence regains, we are committed to support businesses with a range of financial services to help them to seize opportunities and achieve their growth ambitions.”
Pricing Insights
Businesses price expectations declined in May, reversing much of April’s increase. The proportion of firms expecting to raise their prices in the next 12 months fell by 5 points to 65% while those planning to cut prices was unchanged at 2%, resulting in a net balance of 63%, five points lower than in April.