UK Business Confidence Rallies Amid Global Market Recovery

Strategic Insights -

Despite a turbulent period sparked by President Trump's trade offensive, UK business confidence rebounded in May, according to a Lloyds Bank business barometer. The Lloyds Bank business barometer jumped 11 points to 50%, marking a nine-month high, and is in line with Trump's climb-down and the recovery of financial markets. This surge in confidence wiped out losses made in April, as the UK's blue-chip index, the FTSE 100, rebounded from its low of 7,679.48p to close at 8,716.45p.

Key Takeaways:

  • Lloyds Bank business barometer jumped 11 points to 50% in May, marking a nine-month high, as global financial markets recovered from President Trump's tariff onslaught.
  • The rebound in business confidence suggests that firms might be in a stronger position for the next quarter, according to Hann-Ju Ho, senior economist at Lloyds Commercial Banking.
  • Optimism in the economy grew 12 points to 48% following growth figures surpassing expectations for the first three months of the year.
  • GDP expanded by 0.7% in the first quarter of the year, but inflation soared to its highest level since January 2024, reaching 3.5%.
  • Retail confidence fell by five points to 40%, its lowest level since January 2025, amidst pressures from Rachel Reeves' £26bn employer tax raid and uncertainty sparked in Trump's trade war.
  • Construction firms' confidence increased to a nine-month high of 56%, and the service sector topped a one-year high of 54%.
  • Industry anxiety surrounds new taxes on business, with costs up 35% and selling prices expected to increase at the fastest pace for over a year.
  • The British Retail Consortium (BRC) poll found that Labour's employment rights' bill is set to spark job losses and price hikes.
  • Ben Jones, the CBI's lead economist, pointed to fragile consumer demand, although online sales seem to be holding up better.

Statistics:

  • Lloyds Bank business barometer jumped 11 points to 50% in May.
  • Optimism in the economy grew 12 points to 48% following growth figures surpassing expectations.
  • GDP expanded by 0.7% in the first quarter of the year.
  • Inflation reached its highest level since January 2024 at 3.5%.
  • Retail confidence fell by five points to 40%, its lowest level since January 2025.
  • Construction firms' confidence increased to a nine-month high of 56%.
  • The service sector topped a one-year high of 54%.
  • Industry anxiety surrounds new taxes on business, with costs up 35%.
  • Selling prices expected to increase at the fastest pace for over a year.

Sources:

  • Lloyds Bank business barometer
  • City AM
  • British Retail Consortium (BRC)
  • Confederation of British Industry (CBI)
  • Office for National Statistics (ONS)