UK Business Confidence Plummets to 17-Month Low, Experts Call for Budget Relief

UK business confidence has fallen to its lowest point in 17 months, according to Lloyds Bank's latest business barometer, a development that occurred despite Prime Minister Andy Burnham's recent speech pledging to 'restore a higher level of growth and prosperity to Britain.' The findings indicate a significant dip in optimism since April 2025, attributed by economists to escalating global energy prices and broader international uncertainty.

Business groups, while acknowledging Burnham's stated ambitions, are urging the government to provide tangible relief in the upcoming budget. They are seeking 'breathing space' from what they describe as 'growth-killing costs' already imposed by the current administration. Rain Newton-Smith, chief executive of the Confederation of British Industry, emphasized the need to alleviate 'cumulative cost pressures holding back investment and hiring.'

The City's reaction to the Prime Minister's speech was reportedly lukewarm, with analysts noting a lack of "market-friendly or genuinely pro-growth initiatives." This sentiment was reflected in the bond markets, where borrowing costs saw an uptick. Yields on ten-year UK government bonds, known as gilts, approached 19-year highs, settling slightly lower by the end of the day. Earlier, an auction for £4.25 billion of ten-year gilts recorded the highest yield since 1999.

Businesses have expressed concerns about potentially facing further financial burdens in the budget. They have already contended with increases in employer National Insurance contributions, rises in the minimum wage, and the introduction of new workers' rights under the Labour government. Lenders to small businesses, such as Close Brothers, have also reported a challenging year, citing rising borrowing costs and the general economic uncertainty.