Business confidence regains ground at start of fourth quarter

UK business confidence regained momentum at the start of the fourth quarter, rising eight points to 50% in October, according to the latest Lloyds Bank Business Barometer. The rebound follows a dip in September and reflects renewed optimism across most sectors and regions.

Confidence in firms’ own trading prospects climbed 11 points to 62%, while economic optimism improved for the first time in three months, up six points to 39%. The results suggest businesses are looking past recent uncertainty to focus on growth opportunities heading into 2026.

Hiring intentions strengthen

Encouragingly, companies’ recruitment plans gained momentum. Nearly two-thirds (60%) of businesses expect to increase staff levels over the next 12 months, up from 55% in September, while just 12% anticipate cuts, down from 17%. That leaves a net balance of 48%, signalling one of the strongest employment outlooks of the year.

Wage expectations remained stable, with 32% of firms forecasting pay rises of 3% or more, suggesting continued but controlled wage growth amid easing inflationary pressures.

Price pressures steady

Businesses’ pricing intentions were unchanged, with 63% expecting to raise prices in the year ahead – a sign that cost pressures, while persistent, may be stabilising. Firms cited general inflation and higher input and staffing costs as the main drivers.

Hann-Ju Ho, Senior Economist at Lloyds Commercial Banking, said:

“Business confidence has risen following a fall in September, with trading prospects and economic optimism nearing the levels reported in the summer.

“Pricing pressures appear to have eased but continue to be driven primarily by inflation and rising costs. Over the course of this year, firms have demonstrated resilience by adapting to challenges, focusing on hiring and workforce development.”

Sector highlights: manufacturing leads the rebound

Manufacturing confidence surged 31 points to 62%, signalling a strong recovery in sentiment. The construction sector also saw its first increase in five months, up 23 points to 58%, while retail confidence climbed 13 points to 53% as the sector heads into the key “golden quarter.”

The services sector, however, saw confidence slip for the third straight month, down three points to 44%, suggesting uneven momentum across the wider economy.

Regional outlook: North East most upbeat

Nine of the UK’s twelve regions and nations reported rising confidence. The North East, West Midlands, and London emerged as the most optimistic, while Scotland remained above the national average.

Paul Kempster, Managing Director for Commercial Banking Coverage at Lloyds Bank, said: “It’s encouraging to see confidence returning to manufacturing and construction sectors. Both play a key role in our national prosperity.

“As we look towards the end of the year, we can hope that this confidence continues and materialises into further gains for the economy both at a regional, but also national, level. As we head into the busiest time of year for retailers, it’s positive to see their confidence rise at the start of the ‘golden quarter’. More broadly, it’s good to see confidence across all sectors higher on average this year than last year.”