A gauge of UK business confidence rose to a nine-month high, climbing back to a level not seen since soon after Prime Minister Keir Starmer first took power, as markets rebounded and trade tensions eased with the US.
The Lloyds Business Barometer sentiment gauge rose to 50 in May, the highest since August, according to a survey released Friday. The 11-point jump erased the drop seen in April, when US President Donald Trump’s tariff hikes sowed turmoil in financial markets and darkened the economic outlook.
The jump is the latest evidence of the UK economy’s resilience in the face of still-elevated inflation and the lingering risks posed by shifting US trade policies.
The economy expanded during the first quarter at the fastest pace in over a year and retail sales are booming, in a positive shift for the Labour government, whose warnings of tax hikes and budget cuts unnerved businesses and consumers late last year.
“The rebound in business confidence suggests that firms might be in a stronger position for the next quarter,” said Hann-Ju Ho, senior economist at Lloyds Commercial Banking. “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.”
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The survey, conducted from May 1 to 16, followed the market rebound that came after Trump paused some of his tariff increases in order to pursue negotiations with trading partners.
It also came as the UK on May 8 said it reached the basic outline of a deal with the US that would lower levies on British cars and eliminate them on aluminum and steel, softening the prospective hit to those industries.
The Lloyds survey echoes S&P Global’s PMI report, which showed that sentiment for the year ahead climbed to the highest in five months in the wake of the UK-US agreement.
See also: UK economic growth surged in February before Trump’s tariffs
Most of the rebound came from the services sector, however, while manufacturers continued to report shrinking demand for their exports.
Lloyds’ survey also showed that businesses are more upbeat about their own trading prospects and the economic outlook. Confidence among construction businesses climbed to a nine-month high.
Sentiment improved across most UK regions, with Northern Ireland, the East Midlands and the South West posting the largest gains.
Business inflation expectations also came down in May, thanks to fewer firms planning to push up prices over the next year. The decline reversed April’s uptick, when a wide range of cost increases, from food to basic bills, sent the pace of inflation to the highest in over a year.
Lloyds’ gauge of expected staffing levels rose, suggesting more firms are looking to expand headcount, while the number of employers forecasting pay growth of at least 3% also ticked up.
Chart: Bloomberg
