Business confidence ends year higher than start of 2025

UK business confidence finished 2025 on a stronger footing, rising 10 points over the course of the year, according to the latest Lloyds Business Barometer.

Confidence increased to 47% in December, up five points on November and marking a notable improvement from the start of the year. The uplift was driven largely by growing optimism about the wider economy, which rose 11 points to 42%, its highest level in four months.

While firms’ expectations for their own trading prospects dipped slightly by one point to 52%, the increase in economic optimism helped support overall confidence levels.

Businesses’ hiring plans for the year ahead remained positive, although they softened marginally. Overall hiring intentions eased by one point to 55%, while the proportion of firms expecting to increase headcount over the next 12 months remained unchanged at 17%.

Wage growth expectations were steady, with 18% of businesses anticipating pay increases of 4% or more over the coming year, in line with the average seen throughout 2025.

Price expectations fell for the second month in a row, returning to levels seen at the start of the year. A net balance of 59% of firms expect to raise prices in the next 12 months, down one point on November, suggesting some easing in price pressures.

“It is great to see business confidence ending the year on a higher note, up ten points from the start of the year. The uplift in confidence is driven by an 11-point increase in optimism in the wider economy, increasing to a four-month high. Confidence changed most in the construction sector, which saw a big boost in December to its highest level this year.”

Construction firms recorded the strongest improvement, with confidence jumping 22 points to 61%, the sector’s highest reading in 2025. Manufacturing confidence also rose by five points to 49%, while retail edged up to 47%, likely reflecting seasonal demand. In contrast, confidence among services firms slipped slightly, down one point to 41%.

Seven of the UK’s 12 regions and nations reported an increase in confidence in December. The strongest monthly gains were seen in Wales and Yorkshire & the Humber, both rebounding sharply after weaker readings in November. The East Midlands also recorded a notable rise.

Despite smaller monthly increases, the West Midlands and London remained the most confident regions overall, both posting confidence levels of 63%, well above the UK average.

“To end the year stronger than where we started will be a boost for businesses as they gear up for the growth opportunities that they hope lie ahead in 2026. As we approach the peak sales period for retailers, it’s great to see their confidence rise as well as the considerable gains seen in construction. For all businesses regardless of sector, maximising cashflows, investment and a keen eye on margins will stand them in good stead as we head into 2026.”