The latest Lloyds Business Barometer, published by Lloyds Banking Group on 23 December 2025, indicates that UK business confidence closed the year on a stronger footing than it started, as firms signal rising optimism and moderating cost pressures. The monthly survey, which draws on responses from approximately 1,200 businesses across sectors and regions, provides timely insights into sentiment and expectations ahead of the new financial year.

Confidence and Economic Optimism on the Rise

In December, 47 percent of UK businesses reported positive confidence in their current prospects, up five percentage points month-on-month and ten points higher than at the beginning of 2025. Confidence around the wider economy also climbed, with economic optimism reaching 42 percent, a four-month high and contributing to stronger overall sentiment. However, firms’ expectations of their own trading prospects edged slightly lower, down one point to 52 percent.

Senior economists attribute the uplift to improved economic outlook and sectoral performance, particularly in construction and manufacturing. Construction firms saw the most pronounced improvement with confidence rising 22 points to 61 percent—the highest level recorded this year. Manufacturing sentiment increased to 49 percent, while retail sentiment also edged upward to 47 percent, likely reflecting seasonal demand. Services firms bucked the trend slightly with a nominal one-point decline to 41 percent.

Regional Gains Highlight Broad-Based Improvement

Confidence gains were geographically widespread: seven out of twelve UK regions and nations posted higher confidence in December. Wales and Yorkshire & the Humber saw the strongest monthly increases, while the East Midlands also delivered notable improvements. Despite smaller monthly gains, London and the West Midlands continued to register the highest confidence levels nationally at 63 percent, significantly above the UK average.

Hiring and Price Expectations

Hiring intentions remained positive, though slightly eased: 55 percent of firms expect to increase headcount over the next 12 months, a one-point decline from November, with 17 percent planning to expand staffing. Wage growth expectations held steady at 18 percent of firms anticipating wage increases of 4 percent or more—consistent with the 2025 average.

On prices, businesses signaled a continued softening in cost pressures. A net balance of 59 percent expect to raise prices next year, down marginally by one point, returning to levels seen at the start of 2025. This suggests a gradual easing of inflationary pressures among surveyed firms heading into 2026.

Implications for UK Business Strategy in 2026

For corporate decision-makers and investors monitoring UK economic momentum, the December Business Barometer points to a modestly improving sentiment landscape as businesses brace for 2026. Rising optimism and moderating price expectations could support investment, while steady hiring intentions suggest continued labor market resilience.

Sectoral and regional divergences flagged in the data underline the importance of nuanced planning: construction and key regions such as London may offer relative performance resilience, whereas services sectors look poised for more subdued momentum.

Paul Kempster, Managing Director for Commercial Banking Coverage at Lloyds Business & Commercial, observed that the stronger year-end sentiment reflects both rising confidence and strategic reorientation among firms preparing for “growth opportunities that they hope lie ahead in 2026.”

Conclusion

Taken together, the latest barometer data indicates that UK businesses entered the end of 2025 with elevated confidence compared to the start of the year, signaling a cautiously optimistic backdrop for economic activity. While headwinds remain, the combination of improved business confidence, sectoral boosts, and easing price pressures offers a foundation for strategic investment and growth orientation as firms head into 2026.