Lloyds Bank has delivered a sobering assessment of the UK's commercial landscape, issuing a clear warning to millions of its business customers after a significant drop in confidence was recorded.
Key Findings from the November Survey
The bank's latest Business Barometer study found that overall business confidence fell by eight points to 42% in November, a notable decline just ahead of the crucial Christmas trading period. The drop was driven by softening prospects, with confidence in firms' own trading prospects falling nine points to 53%. More starkly, economic optimism fell eight points to just 31%.
Despite this dip, some metrics offered a glimmer of resilience. Retail sector confidence remains higher than at the same point last year. Furthermore, price pressures showed signs of easing, with the net balance of firms planning price increases falling to 60%—the lowest level recorded since January 2025.
Hiring and Wage Expectations for the Coming Year
The survey provided a mixed picture for the jobs market. While hiring intentions have softened slightly, they remain in positive territory. 56% of firms expect to increase their headcount over the next 12 months, a decrease from 60% in October. Those anticipating staff reductions rose to 17%, resulting in a net balance of 39%.
Expectations for wage growth have also moderated. Fewer than two in five firms (35%) now anticipate awarding pay rises of 3% or more in the next year. This compares to the 39% of businesses that reported actually increasing pay by that level over the past 12 months.
Expert Analysis and the Path Forward
Senior Economist at Lloyds Commercial Banking, Hann-Ju Ho, commented on the findings. "Business confidence has eased, with trading and economic prospects softening, though both remain above their long-term averages," he said. Ho emphasised that adaptability and resilience will be key for firms heading into the New Year, noting many are already planning workforce development through training and new technology adoption.
Echoing this sentiment, Paul Kempster, Managing Director for Commercial Banking Coverage, highlighted the underlying strength. "While business confidence has tempered this month, a wide range of metrics remain above the long-term average," he stated. Kempster pointed to upskilling, product innovation, and exploring new markets as critical strategies for businesses planning their 2026 growth ambitions.
The data underscores a cautious but forward-looking mood among UK businesses. As they navigate a complex economic environment, the focus is shifting towards strategic investment in people and processes to secure future growth.
