Business confidence experienced a modest uptick at the close of 2025, according to a recent survey, as firms gained some relief and clarity following the Autumn Budget. Lloyds Banking Group’s latest Business Barometer reported 47% business confidence — marking a 10-point rise in business confidence compared to the start of the year, with half of this increase occurring in the last month. This improvement followed significant tax speculation leading up to the Budget.
Businesses had paused investments in anticipation of a potential tax increase, as concerns mounted about how Rachel Reeves would manage the financial situation. Lloyds’ reported rise in confidence appears to reflect positively on the budget.
Optimism about the wider economy rose sharply, up 11 points to 42%, offsetting a marginal one-point decline in companies’ expectations for their own trading prospects, which stood at 52%.
“It is great to see business confidence ending the year on a higher note, up ten points from the start of the year,” said Hann-Ju Ho, Senior Economist at Lloyds Bank Commercial Banking. “The uplift in business 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 the highest level this year.”
Confidence rose most strongly in construction, up 22 points to 61%, the highest level recorded this year. Manufacturing sentiment also improved, rising five points to 49%, while retail edged up to 47%, likely reflecting seasonal demand. Services confidence slipped one point to 41%.
Regionally, seven of the UK’s twelve regions and nations reported stronger confidence in December. Wales and Yorkshire & the Humber led the monthly gains, rebounding sharply from November. The East Midlands also saw a notable rise, while London and the West Midlands continued to post the highest confidence levels nationally, at 63% each — 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,” said Paul Kempster, Managing Director for Commercial Banking Coverage at Lloyds Bank.
“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.”
The December survey indicates that despite lingering pressures on costs and margins, sentiment among UK businesses has strengthened steadily through the year, supported by resilience in key sectors and improving regional trends.
However, it should be noted that Lloyds’ findings stand to the contrary of other recent surveys. At the start of December, the Institute of Directors reported a sharp decline in business confidence to post-pandemic lows, with their monthly index dropping to -20 from -5, marking the second-lowest reading since April 2020, shortly after the first lockdown began.
