Business confidence across the UK has concluded the year stronger than it began, providing a positive signal for firms entering 2026. The latest Lloyds Business Barometer reveals a net balance of 47% of businesses anticipating growth in the coming year, up from 42% last month and marking a 10-point improvement since the start of 2025.

Sector and Regional Variations

The construction sector recorded the most dramatic uplift, with confidence surging 22 points to 61%its highest level this year. Manufacturing followed with a five-point rise to 49%, while retail edged up to 47%, potentially buoyed by seasonal demand. Services saw a marginal decline to 41%.

Regionally, seven of the UK's twelve areas reported gains. Wales and Yorkshire & the Humber posted the sharpest rebounds, while the West Midlands and London maintained the highest levels at 63% each, significantly above the national average.

Moderating Pressures on Hiring and Prices

Firms' hiring intentions remained positive at 55% for the year ahead, though slightly down one point, with 17% planning headcount increases. Wage growth expectations held steady, with 18% anticipating 4% or more rises, aligning with the 2025 average.

• A net 59% of businesses expect to raise prices next year, down one point and returning to January levels.
• Price expectations have softened for the second consecutive month.

Hann-Ju Ho, Senior Economist at Lloyds Commercial Banking, attributed the uptick to an 11-point jump in economic optimism to 42%, a four-month high. "It is great to see business confidence ending the year on a higher note," Ho stated.

Outlook for 2026

Paul Kempster, Managing Director for Commercial Banking Coverage at Lloyds, highlighted the boost for businesses gearing up for growth. He noted gains in construction and retail as particularly encouraging ahead of peak sales, urging firms to focus on cashflows, investment, and margins.

Despite own trading prospects dipping slightly to 52%, the broader economic optimism has offset this, painting a cautiously hopeful picture as the UK economy navigates ongoing challenges.