UK business confidence dipped in January as global economic worries deepened, even as firms grew more optimistic about their own activity.
Summary:
UK business confidence eased in January, reflecting a sharp deterioration in views on the global economy.
Lloyds’ business barometer slipped to +44%, driven by a one-year low in economic optimism.
Firms remained more upbeat about their own activity, with expectations rising to a three-month high.
Hiring intentions and wage growth expectations strengthened, pointing to resilience at the firm level.
Political and global uncertainty continues to weigh on sentiment despite pockets of domestic momentum.
British business confidence weakened in January as concerns about the wider global economy intensified, even as firms reported improving expectations for their own activity, according to the latest survey from Lloyds.
Lloyds’ monthly Business Barometer slipped to a net balance of +44% in January, down from +47% in December. The decline was driven by a sharp deterioration in companies’ views on the economic outlook, with net economic optimism falling 14 points to +28%, its lowest level in a year. The survey suggests that while businesses remain relatively confident in their own operations, broader macroeconomic uncertainty is increasingly weighing on sentiment.
The survey period, which ran from January 5 to January 20, coincided with renewed geopolitical and trade uncertainty. During that time, US President Donald Trump threatened to impose tariffs on Britain and other European countries that opposed his stance on Greenland, a development that likely contributed to the darker assessment of global conditions.
In contrast, expectations for firms’ own trading prospects improved markedly. Businesses’ outlook for their own activity rose seven points to +59%, the strongest reading in three months. Lloyds said this firm-level resilience mirrors signals from other recent indicators, including January’s S&P Global Purchasing Managers’ Index, which also pointed to a modest pickup in activity at the start of the year.
Labour market intentions showed signs of renewed strength. Hiring plans improved for the first time in three months, while expectations for wage growth also increased. Just over one in five firms said they expect salaries to rise by 4% or more, the highest proportion in five months, suggesting ongoing pressures in parts of the labour market despite softer headline confidence.
Lloyds noted that overall business confidence remains stronger than a year ago and well above its long-run average of +30%. However, it has fallen back from mid-year highs, when sentiment was buoyed by easing inflation concerns. Since then, uncertainty surrounding potential tax rises in the annual budget delivered by finance minister Rachel Reeves has weighed on confidence.
According to Lloyds, the divergence between firm-level optimism and wider economic caution highlights businesses’ ability to manage external risks while continuing to focus on growth opportunities. For policymakers and markets, the data points to a UK economy that remains resilient at the micro level but increasingly sensitive to global and political headwinds.
