Economic optimism surges in May as 40% of companies announce plans to expand workforce
Business Owner Confidence Reaches 9-Month High Amid Recovery and Easing Trade Tensions
Confidence among business owners reached a nine-month high in May as financial markets recuperated and global trade tensions eased, according to a survey by Lloyds Bank.
The latest Lloyds Business Barometer showed a surge of 11 points to 50%, the highest level since August 2024. In the previous month, the index had recorded a 10-point drop. The survey involves interviews with 1,200 firms with an annual turnover above £250,000.
Hann-Ju Ho, a senior economist at Lloyds Commercial Banking, noted a "sharp increase in economic optimism" due to the recovery in financial markets and the easing of global trade tensions. Approximately 40% of businesses are planning to increase their staffing levels, a three-point increase from April. Additionally, 34% expect pay growth of 3% or more.
The construction sector registered a nine-month high business confidence level of 56%, while the service sector reached a one-year high of 54%. Manufacturing grew by two points to 40%. However, retail confidence fell five points to 40%, its lowest level since January.
The boost in business confidence was felt across the UK, with nine out of the twelve regions recording stronger confidence, notably Northern Ireland, the East Midlands, and the South West. The East Midlands saw its highest confidence levels since 2018, reaching 66% in May.
Paul Kempster, managing director for commercial banking coverage at Lloyds Business and Commercial, expressed optimism about the increased confidence, stating, "It's great to see that across many metrics, businesses are more hopeful for the future and are backing themselves for success in 2025."
The rise in economic optimism also increased by 16 points, while trading prospects saw growth as well amid progress in global trade agreements. The overall positive trends in these metrics are signs of potential growth and resilience in the business community and the broader economy.
Business owners are now investing more in their businesses due to the increased optimism, as indicated by the surge in the Lloyds Business Barometer. This rise in confidence could potentially pave the way for significant banking activities, such as securing mortgages and loans for business expansion. The easing of global trade tensions and recovery in financial markets could also lead to increased investments in various sectors, further fuelling the growth of the economy. Moreover, the overall positive trends in the metrics may encourage more companies to consider funding options in the finance sector for their future business needs.
