UK business confidence is at its highest level in 10 years as the service sector saw the biggest jump in optimism month-on-month, according to Lloyds Bank.
Firms were more optimistic for the third consecutive month, with the rise driven by improved trade prospects and an improved economic outlook.
Lloyds’ survey suggested hiring intentions had also hit a 10-year high “despite cost pressures”, researchers said, with Rachel Reeves’ £20bn tax raid on employers recently highlighted as a factor driving unemployment across the country.
Hann Ju-Ho, senior economist at Lloyds, said the upward trend signalled there was “cautious optimism” across the UK economy as firms were “positioning for growth”.
“Overall business confidence remains buoyant, with firms well placed to take advantage of opportunities such as new markets, adopting new technology and workforce expansion amid evolving market conditions,” Ho said.
Keir Starmer has frequently used Lloyds Bank’s business barometer as his go-to economic metric during PMQs and other debates.
But the survey of some 1,200 UK companies with a turnover higher than £250,000 is widely seen as an outlier amid bleaker survey results by leading City firms and business groups.
S&P Global’s most recent flash purchasing managers’ index (PMI), which is most closely followed by top economists, suggested business confidence was “subdued” and below long-term averages.
The Confederation of British Industry (CBI) meanwhile suggested business confidence had been in negative territory for 10 months while more firms were planning to shed staff in the coming months.
Business confidence higher among employers
In what may come as positive news for Reeves and officials in the Treasury, the Recruitment and Employment Confederation (REC) said employers were more optimistic about hiring and investing in the three months to June.
The move into positive territory marks a return to pre-Autumn Budget levels.
The short term permanent hiring outlook for the next three months was up by three percentage points compared to the last survey in April.
London saw the highest confidence levels of any region in both permanent and temporary hiring.
REC’s Insight Jobs Outlook survey suggested employers remained somewhat downbeat about the UK economy’s future, with this year’s Autumn Budget threatening to undo progress.
“Confidence is the key to growth in 2025, so it is good that businesses are beginning to shake off some concerns on investment and hiring that they have carried for almost three years,” REC chief executive Neil Carberry said.
“Despite a spring battering from the NICs rise, inflation and other policy costs, there is hope that businesses can step up their trading in the second half of the year.
“Getting investment plans unblocked will turn firms from delays of recruitment to hopeful hirers.
“The upcoming Budget must strike a better balance between supporting business growth and addressing the public finances, something that was missing last year. That round of increased employment costs stalled a budding recovery in employer sentiment.”