UK business confidence fell to its lowest level in 17 months during September as companies became more cautious about the economy, demand and rising costs, according to the latest Business Barometer from Lloyds Banking Group.
The overall confidence measure fell 12 points to 41%, down from 53% in August and its weakest reading since April 2025. Despite the decline, confidence remained above the survey’s long-term average of 30%.
The deterioration was concentrated in companies’ assessment of the wider economy. Economic optimism dropped 18 points to 31%, while expectations for businesses’ own trading prospects also weakened but remained higher at 50%.
Companies expecting activity to deteriorate identified economic uncertainty, higher costs and weaker customer demand among their principal concerns. Global energy prices and geopolitical uncertainty also weighed on September’s result.
The decline varied sharply according to company size. Confidence among businesses with annual turnover below £5m dropped 14 points to 39%, while companies turning over between £5m and £25m recorded a five-point fall to 54%.
Larger businesses moved in the opposite direction. Companies with turnover between £25m and £100m reported a three-point increase in confidence to 75%, supported by stronger demand and sector-specific improvements.
The divergence provides another indication that cost and demand pressures are not being distributed evenly. Larger organisations generally have greater scope to spread fixed costs, negotiate with suppliers, access financing and diversify their customers. Smaller companies can have less room to absorb energy, wage and input-cost increases without reducing margins or raising prices.
Pricing expectations edged higher despite weaker confidence. Some 52% of businesses expected to increase prices during the next 12 months, one percentage point more than in August, although the measure remained below its level a year earlier.
Sector performance was similarly mixed. Retail confidence increased three points to 51% and construction fell eight points to 47%. Manufacturing recorded a 19-point decline to 36%, while services fell 21 points to 35%.
The manufacturing and services movements are notable because together the sectors account for a large share of employment and business activity. Both reported pressure from costs, inflation and international uncertainty.
Regional confidence fell across 10 of the UK’s 12 nations and regions. The West Midlands was a marked exception, rising 22 points to 69% and recording the strongest regional result. The North East also increased, reaching 50%.
Wales fell to 16%, the East Midlands to 20% and the South West to 25%. London remained above the UK average at 46% despite a 15-point monthly decline.
The survey coincides with revised national accounts showing the economy grew by 0.5% in the second quarter, slightly faster than initially estimated. That data describes activity during the spring, whereas Lloyds’ September survey captures a more recent deterioration in expectations approaching the final quarter.
Confidence measures do not translate directly into hiring and investment decisions, but persistent changes can affect willingness to commit capital, recruit staff or expand capacity. A broad deterioration becomes more consequential when caution begins influencing those decisions.
More than half of surveyed businesses continue to expect output to rise during the coming year, and the overall confidence reading remains above its long-term average. September’s sharp decline nevertheless shows that the improvement recorded earlier in the summer has become less secure as cost, demand and geopolitical pressures accumulate.
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