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Businesses confident in their own trading outlook while wider economic sentiment softens

Lloyds
Published on: 30 January 2026
2 min read
 
  • Overall business confidence decreases by three points, but remains seven points higher than at start of 2025
  • Businesses’ confidence in their own trading prospects increased to a three-month high
  • Over half of businesses expect to increase headcount in the year ahead 
  • Strong regional gains seen in London and the West Midlands

44%

overall business confidence

-3 points

monthly change

53%

plan to increase headcount

59%

trading prospects

Business confidence softened slightly to 44% in January, decreasing three points from last month according to the latest Lloyds Business Barometer. 

The results from the Business Barometer, a survey of 1,200 business 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%. 

Hiring intentions improve  

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.  

Prices pressures remains steady

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. 

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. 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.

Hann-Ju Ho Senior Economist, Lloyds Commercial Banking

 

Sector Highlights 

Retail sentiment increased marginally in January, up two points to 49%, while confidence in the service sector rose slightly, up one point to 42%, the first increase since the summer. Confidence fell in the construction sector following a particularly strong increase in December. 

Regional Outlook

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 cashflow and making strategic investment decisions will be key to acting quickly as new opportunities emerge.

Paul Kempster Managing Director for Commercial Banking Coverage, Lloyds Business & Commercial

 

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