A leading indicator of UK business confidence surged to a nine-month high in May, marking its strongest reading since Keir Starmer assumed office as Prime Minister, according to the latest Lloyds Business Barometer survey.
This resurgence in optimism comes as financial markets recovered and trade frictions with the US eased, reversing much of the uncertainty that clouded the outlook just a month prior.
The Lloyds sentiment index rose by 11 points to 50, its highest mark since last August, fully recouping losses registered in April. That earlier setback was triggered by fresh US tariff hikes under President Donald Trump, which had unsettled markets and intensified fears about the global economic environment.
The current bounce in confidence is regarded as further evidence of the UK economy’s resilience, even as businesses and households contend with persistent inflation and international policy headwinds.
The UK notched its fastest quarterly growth in over a year in Q1, and robust retail activity is supporting a more upbeat outlook for the Labour-led government. Concerns over fiscal tightening and potential tax hikes that rattled sentiment late last year now appear to have faded as economic indicators improve.
The survey, conducted from May 1-16, followed a period of market stabilization after a pause in some of Trump’s planned tariff increases and the announcement of a provisional UK-US trade deal.
The agreement, outlined in early May, will see tariffs on British car exports to the US lowered and duties on aluminium and steel eliminated, providing relief for manufacturers facing export headwinds.
Echoing signals in S&P Global’s PMI data, which showed business expectations at a five-month peak, the Lloyds report highlighted particularly strong gains in the service sector, even as manufacturers continued to record weaker overseas demand.
Construction sector confidence also reached its highest level in nine months, while regional sentiment climbed in most parts of the country, led by Northern Ireland, the East Midlands, and the South West.
Elsewhere, business expectations of inflation moderated in May, as fewer companies indicated plans to hike prices—a reversal of the broad-based cost pressures seen in April. More firms are now looking to increase staff levels, and the percentage of employers expecting to offer pay rises of at least 3% also edged higher.
