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UK business confidence surged in May to its highest level since last August, according to new data from Lloyds Bank.
The rise was driven by a sharp rebound in global financial markets and a softening in trade tensions between the US and its partners.
The business barometer rose by 11 points to 50% up from 39% in April, more than reversing the dip seen last month. The reading is now at its strongest since the summer of 2024.
The lender said the sharp increase in confidence reflects improving sentiment in global markets after US President Donald Trump paused his threatened “reciprocal tariffs” until July. That decision – followed by a US court ruling this week declaring the tariffs illegal – fuelled optimism across Asian, European and American stock exchanges, as investors reassessed the outlook for global growth.
The survey, based on responses from 1,200 firms, also found improvements in trading prospects and hiring intentions. A third of businesses (34%) said they plan to award pay rises of 3% or more, while 65% reported intentions to increase prices in the year ahead – down five points from April. Only 2% said they would cut prices.
The data comes amid a mixed inflation picture. UK inflation rose to 3.5% in April, the highest since January 2024, up from 2.6% the month before. However, stronger-than-expected economic growth is helping to support business sentiment. GDP expanded by 0.7% in the first quarter of 2025, and this week the International Monetary Fund marginally upgraded its full-year UK growth forecast to 1.2%.
The Lloyds report adds to signs that the UK economy is showing resilience, even as concerns linger over inflation, rising wage demands and the future of global trade policy.
Despite uncertainties ahead, the strong rebound in confidence points to a more optimistic outlook among British firms heading into the second half of the year.
The East Midlands was the most confident region, followed closely by the north-east of England. Business confidence in Scotland was also above the UK average, though the data found that Scottish companies reported lower confidence in their own business prospects.
Hann-Ju Ho, Senior Economist at Lloyds Commercial Banking said “The rebound in business confidence suggests that firms might be in a stronger position for the next quarter. The rise in confidence is driven by a sharp increase in economic optimism, reflecting the recovery in financial markets amid the easing of global trade tensions.”