New data from Lloyds Banking Group indicates a tentative uplift in UK business sentiment at the close of 2025, following the clarity provided by Chancellor Rachel Reeves's Autumn Budget.
Relief After Budget Speculation
According to the latest Lloyds Business Barometer, overall business confidence climbed by 10 points by the end of 2025 compared to the start of the year. Half of this increase occurred in the final month, after a period of intense speculation over potential tax measures. In the run-up to the Budget on 26 November, many firms halted investment plans, fearing a significant tax raid as the government sought to address a reported £30bn fiscal black hole.
A survey by Helm in October found that 84 per cent of business leaders were concerned about further tax rises impacting their profits. The eventual Budget included a £26bn tax increase, largely through higher employers' national insurance contributions, alongside a 6.7 per cent rise in the minimum wage. Despite this, Lloyds' post-Budget reading showed economic optimism rising to 42 per cent, a four-month high.
Mixed Signals Across the Economy
This renewed optimism exists against a complex backdrop. The Office for National Statistics (ONS) later reported the economy contracted by 0.1 per cent in October, a period dominated by pre-Budget uncertainty. Furthermore, hiring intentions remain subdued, with only 17 per cent of businesses planning to increase staff numbers. This caution is reflected in data from jobs site Adzuna, which showed vacancies falling by 6.4 per cent in November to 745,448.
Construction Sector Defies Gloomy Forecasts
The Lloyds survey recorded the most pronounced improvement in the construction sector, where confidence surged 22 points to 61 per cent in December—its highest level all year. Senior economist Hann-Ju Ho noted the sector "saw a big boost".
This positive reading contrasts sharply with other industry analyses. Commercial property development has reportedly plunged to a decade low, and S&P Global's Purchasing Managers' Index indicated the construction sector endured its worst downturn in five and a half years in December 2025.
The Lloyds data has also been viewed as an outlier compared to surveys from other major business groups. The Institute of Directors reported business confidence plummeting to post-pandemic lows after the Budget, with its index falling to -20 from -5.
