Business confidence good or bad - Opposite Views Are Around

1st November 2025

The Good - Lloyds
Business confidence rose in October, increasing eight points to 50%, according to the latest Lloyds Business Barometer. The rise follows a dip in September, with the uplift marked by increased confidence across several regions and sectors.

Confidence in businesses' own trading prospects increased by 11 points to 62%, while economic optimism improved for the first time in three months, up six points to 39%.

Hiring intentions strengthen
Businesses' hiring intentions for the next 12 months also improved, with 60% of all businesses surveyed expecting to hire more staff in the coming year, up from 55% in September. 12% anticipate reducing staffing levels, down from 17%, resulting in a net balance of 48%.

Wage growth expectations remained steady in October, with 32% of UK businesses forecasting average pay increases of 3% or more.

Prices pressures hold steady
Businesses' price expectations remained unchanged in October, with a net balance of 63% of firms expecting to raise prices over the next year. 65% of firms said they would raise prices in the coming year, while those anticipating price reductions remained at 2%.

Hann-Ju Ho, Senior Economist, Lloyds Commercial Banking said, "Business confidence has risen following a fall in September, with trading prospects and economic optimism nearing the levels reported in the summer. Pricing pressures appear to have eased but continue to be driven primarily by general inflation and rising input and staffing costs. Over the course of this year, firms have demonstrated their resilience by adapting to challenges, despite higher labour costs, by focusing on hiring and workforce development.

Sector Highlights: Manufacturing on the rise
October saw the manufacturing sector's confidence increase by 31 points to 62%, indicating stronger momentum in the sector. Retail firms also reported a rise in confidence, with the figure increasing by 13 points to 53%. Construction saw a confidence gain for the first time in five months, increasing 23 points to 58%. However, the service sector saw a decline for a third consecutive month, falling three points to 44%.

Regional Outlook: North East most optimistic
Nine of the UK's twelve regions and nations saw a rise in confidence in October. The North East, West Midlands and London were the most upbeat while Scotland remained above the UK average.

Paul Kempster, Managing Director for Commercial Banking Coverage, Lloyds Business & Commercial said, "It's encouraging to see confidence returning to manufacturing and construction sectors. Both play a key role in our national prosperity. As we look towards the end of the year, we can hope that this confidence continues and materialises into further gains for the economy both at a regional, but also national, level. As we head into the busiest time of year for retailers, it's positive to see their confidence rise at the start of the ‘golden quarter'. More broadly, it's good to see confidence across all sectors higher on average this year than last year.

Source
https://www.lloydsbankinggroup.com/media/press-releases/2025/lloyds-bank-2025/business-confidence-regains-ground-at-start-of-fourth-quarter.html

The Bad - Institute for Directors
The IoD Directors' Economic Confidence Index, which measures business leader optimism in prospects for the UK economy, fell to -74 in September 2025 from -61 August.

This exceeds the recent record low of -72 in July 2025 and marks the lowest reading of the Index since its introduction in July 2016.

Business leader confidence in their own organisations also fell to -7 in September 2025, from +1 in August. This matches the level recorded in November 2024 (-7).

This negative trend is also reflected in the underlying indicators:

Cost expectations rose to +89 in September 2025, from +85 in August. This is the highest reading of the indicator since its introduction in November 2017 and exceeds the previous series high recorded in February 2025 (+87).
Headcount expectations fell to -13, from -4.
Investment intentions fell to -20, from -8.
Revenue expectations fell to 0, from +12.
Wage expectations jumped to +64, from +42.
Export expectations rose to +6, from +5.

On the biggest factors driving businesses' outlook for costs over the year ahead (last asked in March 2025), the top three remain unchanged in ranking. The most significant is labour costs, selected by 83% (up from 77% in March 2025), followed by supply chain inflation (34%, from 36%) and energy costs (32%, from 34%).

Anna Leach, Chief Economist at the Institute of Directors, said, "Business confidence has plumbed new depths in September, following a fleeting improvement at the tag-end of summer. Conditions worsened across the board, with cost expectations hitting a record high, driven notably by employment costs. Investment expectations declined again, although remained somewhat above the most recent low in November 2024. Meanwhile headcount expectations continue to seesaw as the effects of the April rises in employment taxes and the living wage, alongside future concerns over employment regulations, continue to reverberate across companies.

"Business leaders are calling for a reduction in government-generated costs - whether through a lower tax burden or lighter regulation. But crucially they are seeking a more coherent and credible plan for growth. Some positive steps are in place - including additional public sector investment and long-term policy plans. But persistent fears that taxes on business and assets will rise are stifling confidence, holding back investment, and threatening growth and living standards. The Chancellor’s conference speech rightly reiterated the role that fiscal credibility has in providing the platform for growth. But we urgently need a genuinely growth-focussed Budget that has business at its heart, that delivers genuine policy coherence and stability and reduces regulatory and tax burdens on business."

The IoD Directors’ Economic Confidence Index measures the net % positive answers from members of the Institute of Directors to the question ‘How optimistic are you about the wider UK economy over the next 12 months?’ on a five-point scale from ‘very optimistic’ to ‘very pessimistic’.

Source
https://www.iod.com/news/uk-economy/iod-press-release-business-confidence-falls-to-new-record-low/

General
Key factors affecting confidence Cost pressures: High cost expectations are a major concern for businesses, particularly for the IoD, with the indicator reaching its highest-ever level in September.

Tax concerns: Taxation has emerged as the leading external concern for UK businesses, likely related to tax uncertainty.Investment and hiring.

Lower investment intentions and a decline in headcount expectations are contributing to the pessimistic outlook from some surveys.

Profitability: Slower profit growth and deteriorating profit margins are contributing to lower confidence, especially in sectors like retail and wholesale.

Economic outlook: Expectations for economic growth have dropped to a two-and-a-half-year low. 

Sector performance Manufacturing: Showed signs of a rebound in confidence in Q3, with sentiment increasing significantly.

Services: Also saw gains in the BDO index, reaching its highest level since October 2024.

Property: Expressed the lowest confidence level at \(-23.2\).Retail and Wholesale: Reported very low confidence levels, reflecting challenges with high national insurance costs and customer demand.