Business confidence in the United Kingdom has fallen to its lowest level in 17 months, according to the latest Lloyds Bank business barometer, signaling growing concerns among companies amid rising global economic pressures. The report showed business sentiment has deteriorated to its weakest point since April 2025, despite recent government assurances.
The decline follows a key speech by Prime Minister Andy Burnham at the party conference, which aimed to reassure markets and outline plans to boost economic growth. However, the address failed to allay doubts among investors and business leaders, with markets responding negatively. Yields on ten-year UK government bonds, known as gilts, spiked to just above 5.42%, near a 19-year high reached the previous day, before settling slightly lower by the end of trading. Earlier in the day, the UK government sold £4.25 billion of ten-year gilts at the highest yields seen since 1999, underscoring concerns over borrowing costs.
Hann-Ju Ho, senior economist at Lloyds Commercial Banking, identified rising global energy prices and heightened uncertainty in international markets as key factors behind the drop in business optimism. The deteriorating confidence contrasts with Burnham’s pledge to restore sustained growth and prosperity in Britain, highlighting the challenges the government faces in convincing both markets and firms.
Business groups broadly welcomed the government’s ambition but called for measures to ease the financial strain on companies in the upcoming Budget. Mike Morgan, chief executive of Close Brothers, which provides financing to many small businesses, emphasized the difficult environment firms are navigating. He pointed to rising borrowing costs and the uncertainty surrounding upcoming fiscal policies, urging the government to introduce “pro-business growth ideas” without delay.
Rain Newton-Smith, chief executive of the Confederation of British Industry (CBI), echoed these concerns, stressing the need for “breathing space” from the cumulative pressures weighing on investment and hiring decisions. She highlighted that firms are currently grappling with increased costs stemming from employer National Insurance contributions, minimum wage hikes, and new workers’ rights implemented under the Labour government.
Despite these calls, some financial market commentators expressed disappointment with the Prime Minister’s speech for lacking “market-friendly or genuinely pro-growth initiatives.” Kallum Pickering of Peel Hunt described the absence of policies explicitly designed to foster growth as a missed opportunity to support investor confidence.
The combination of rising global energy costs, tightening monetary conditions, and uncertainty over government policy is contributing to a cautious outlook among UK businesses. As the government prepares for the forthcoming Budget, companies are hopeful that no additional burdens will be imposed that might hinder economic recovery efforts.