Lloyds Bank has issued a cautionary note after its latest research indicated a slight softening in business confidence across the United Kingdom. The findings come from the bank's comprehensive Business Barometer, which surveyed 1,200 companies from various sectors and regions nationwide.
A Detailed Look at the Confidence Metrics
The overall business confidence index registered at 44% in January, marking a three-point decrease from the previous month's figure. Despite this recent dip, it is crucial to note that confidence levels remain significantly higher than at the beginning of 2025, showing a seven-point improvement, and continue to sit well above the long-term average of 30%.
Diverging Trends in Trading and Economic Optimism
A closer examination of the data reveals a nuanced picture. Confidence in businesses' own trading prospects actually strengthened, rising by seven points to reach 59%, which represents a three-month high. This suggests that firms feel positive about their individual operational performance and market position.
Conversely, optimism regarding the broader UK economy showed a decline, falling to 28%. This indicates a growing caution among business leaders about external macroeconomic factors and national economic conditions, even as they maintain faith in their own company's trajectory.
Positive Signals in Employment and Wage Expectations
The survey brought encouraging news on the employment front. Hiring intentions for the year ahead improved in alignment with the stronger trading confidence. The net balance for hiring plans rose by three points to 41%, marking the first increase in this metric for three months.
Specifically, 53% of businesses now plan to increase their headcount, while only 12% intend to reduce staff numbers, down from 17% previously. This shift points towards a more robust labour market outlook within the corporate sector.
Wage growth expectations also saw an uptick, moving in tandem with the improved hiring plans. A notable 21% of firms anticipate salary increases of 4% or more during 2026, reaching a five-month high in this expectation.
Pricing Strategies and Economic Commentary
In terms of pricing, expectations saw a moderate increase for the first time in five months. The data shows that 64% of businesses, up from 63%, expect to raise their prices, while only 2% plan reductions.
Paul Kempster, Managing Director for Commercial Banking Coverage at Lloyds Business & Commercial, emphasised the importance of strategic financial management. He stated, "Keeping a close focus on cashflow and making strategic investment decisions will be key to acting quickly as new opportunities emerge."
Hann-Ju Ho, Senior Economist at Lloyds Commercial Banking, provided further analysis: "Firms are reporting confidence in their trading prospects at the start of the year, despite a slight softening of wider economic optimism. This points to businesses’ ability to manage external risks and a focus on growth opportunities. The first rise in confidence in the services sector in seven months is encouraging given the sector’s central role in supporting UK economic activity."
The Lloyds Business Barometer continues to serve as a vital indicator of the UK's commercial landscape, offering insights into the sentiments that drive investment, employment, and economic growth decisions across the nation's business community.
