UK businesses are quietly confident about having a good 2026 – despite a fragile economy
Business confidence softened slightly to 44% in January, decreasing three points from last month, the latest Lloyds Business Barometer shows. But there is growing confidence from UK companies that they will be able to ride the headwinds in 2026.
Notably, the results from the Business Barometer, a survey of 1,200 businesses from across the UK, found that confidence was seven points higher than at the start of 2025 and above the long-term average of 30%.
Businesses’ confidence in their own trading prospects was up seven points to 59% – a three-month high. However, optimism towards the wider UK economy reduced to 28%.
Firms’ hiring plans for the year ahead improved in line with businesses’ confidence in their own trading performance, with the net balance rising three points to 41%, the first rise in three months. 53% now plan to increase headcount and 12% plan to reduce it, down from 17%.
Wage growth expectations rose in line with hiring plans, with 21% expecting salaries to grow by 4% or more in 2026, a five-month high.
Businesses’ price expectations moderately increased for the first time in five months, with 64% of businesses, up from 63%, expecting to raise prices, with 2% planning to reduce them.
Growing confidence
“Firms are reporting confidence in their trading prospects at the start of the year, despite a slight softening of wider economic optimism. This points to businesses’ ability to manage external risks and a focus on growth opportunities,” said Hann-Ju Ho (Senior Economist, Lloyds Commercial Banking).
“The first rise in confidence in the services sector in seven months is encouraging, given the sector’s central role in supporting UK economic activity.”
Five of the UK’s twelve regions and nations saw a rise in confidence in January. The strongest monthly gains were seen in London and the North West. London remains the most confident region at 69%, a six-point increase from December, with sentiment in the West Midlands edging higher, up two points to 65%.
“It’s encouraging to see businesses start the year with renewed confidence in their ability to deliver for customers, setting themselves up well to capture the growth opportunities ahead. Keeping a close focus on cash flow and making strategic investment decisions will be key to acting quickly as new opportunities emerge,” said Paul Kempster
(Managing Director for Commercial Banking Coverage, Lloyds Business & Commercial).
