Business sentiment across the UK demonstrated a cautious improvement in May, according to the Lloyds Business Barometer. Overall confidence rose by three points to 47%, marking a tentative stabilization following April’s dip. While still below the 12-month average of 48%, the figure remains well above the long-term survey average of 30% recorded since 2002.
Firms’ outlook on their own trading prospects strengthened more noticeably, climbing four points to 58%—slightly above the yearly average of 57%. A solid 66% of respondents anticipated higher output in the coming year, compared to just 8% expecting a decline.
Persistent challenges cited by those forecasting weaker performance included ongoing economic uncertainty, elevated cost pressures, and softening customer demand.
Optimism regarding the broader economy edged up two points to 35%, against a 12-month average of 39%.
Among surveyed businesses, 55% expressed positive views on the wider economic landscape, while 20% remained pessimistic.
Key factors weighing on sentiment continued to be rising inflation, cost increases, and international instability, though concerns over higher interest rates eased somewhat month-on-month.
Sectoral variations highlighted notable resilience in certain areas. Construction experienced the sharpest rebound, with confidence surging 15 points to 44%. Retail also posted healthy gains, rising eight points to 53%.
Services held steady at 45%, while manufacturing saw a modest four-point decline to 43%. Construction firms showed particular buoyancy in their trading outlook, gaining 18 points to 54%.
Regionally, sentiment improved in seven of the twelve UK nations and regions.
The North East stood out with a remarkable 23-point jump to 69%, driven largely by stronger customer demand.
The West Midlands followed with a 13-point increase to 62%, emerging as one of the most confident areas.
These shifts underscore how localized factors—from clean energy initiatives in the North East to advanced manufacturing strengths in the Midlands—continue to shape business outlooks.
Investment appetite among firms also picked up, advancing four points to 37%. Priorities for potential spending focused on staff training (43%), technology upgrades (38%), and artificial intelligence applications (36%), signaling a forward-looking approach despite external uncertainties.
Amanda Murphy, CEO of Lloyds Business and Commercial Banking, noted that the modest uptick suggests businesses are regaining their footing.
She highlighted the North East’s performance and the construction sector’s recovery, which has helped align it more closely with other industries.
Murphy emphasized the diverse growth drivers across regions and Lloyds’ commitment to providing tailored financial support to help businesses expand.
Senior Economist Hann-Ju Ho added context on the broader picture, observing that internal business metrics have shown greater stability than wider economic perceptions.
This resilience indicates companies’ ability to navigate uncertainty without drastic adjustments, even as global events—such as tensions in the Middle East—temper ambitions for market expansion. The May Barometer paints a picture of cautious optimism. While global and domestic pressures linger, UK businesses appear adaptable, focusing on internal strengths and targeted investments to drive future growth.
