LONDON BUSINESS CONFIDENCE FALLS AS ECONOMIC CONCERNS OVERSHADOW GROWTH PLANS
FIRMS LOOK TO AI AND NEW MARKETS FOR GROWTH
Business confidence across London edged lower in May as concerns about the wider economy offset growing optimism among firms about their own trading prospects.
According to the latest Lloyds Business Barometer, overall business confidence in the capital fell four points to 47%, reflecting a growing divergence between how businesses view their own performance and their outlook for the wider economy.
While London firms became more optimistic about their trading prospects, confidence in the UK economy fell sharply, highlighting the continuing uncertainty facing businesses despite signs of resilience at company level.
Trading Confidence Remains Strong
The survey found that confidence in individual business performance rose five points to 64%, suggesting many firms remain confident about demand for their products and services.
However, optimism regarding the broader economy dropped 12 points to 30%, pulling down the capital’s overall confidence score from 51% in April to 47% in May.
The figures suggest that while many London businesses believe they can continue growing, concerns remain around economic conditions, inflationary pressures, geopolitical uncertainty and the wider operating environment.
Despite the decline, London’s confidence level remains broadly in line with recent trends. Since May 2025, business confidence in the capital has averaged 58%, reaching a high of 69% last August and a low of 46% in November.
Businesses Continue To Invest In Growth
The survey indicates that many firms are continuing to focus on long-term growth opportunities despite ongoing economic challenges.
When asked about priorities over the next six months, London businesses identified technology investment as the leading growth driver.
More than half (53%) said introducing new technologies such as artificial intelligence and automation would be a key focus area, while 52% planned to enter new markets and 45% expected to invest in workforce development and training.
The findings suggest businesses are looking beyond short-term uncertainty and positioning themselves for future competitiveness through innovation and expansion.
Kirsty Sadler, Regional Director for London at Lloyds, said: “While overall business confidence in London has fallen slightly this month, it’s encouraging to see firms across the capital feeling more positive about their trading outlook.
“London firms are focusing on opportunities to grow, from adopting new technologies such as AI to expanding into new markets or investing in training for their people.
“We’re here to help businesses build resilience, with the financial support and expertise they need to navigate uncertainty and realise their growth ambitions.”
Recruitment Intentions Ease
The survey also revealed a moderation in hiring intentions.
Just over a third (36%) of London businesses expect to increase staffing levels during the next 12 months, representing a nine-point decline compared with the previous month.
The drop comes as many employers continue to balance growth ambitions against rising employment costs and broader economic pressures.
However, the majority of businesses still anticipate stable or growing workforce requirements, suggesting London’s labour market remains relatively resilient.
UK Confidence Improves
Nationally, business confidence improved slightly during May.
Overall UK business confidence rose three points to 47%, supported by stronger expectations for future trading performance and a modest improvement in economic sentiment.
Across the UK, firms’ trading outlook increased four points to 58%, while confidence in the economy rose two points to 35%.
Around two-thirds (66%) of businesses expect output to increase during the coming year, while only 8% anticipate a decline.
The strongest gains were recorded in Northern Ireland, while the North East and West Midlands emerged as the UK’s most confident regions.
Balancing Optimism And Uncertainty
Although confidence remains below longer-term highs, the latest figures suggest many businesses are adapting to an environment characterised by higher costs, ongoing geopolitical uncertainty and changing customer demand.
Amanda Murphy, CEO of Lloyds Business and Commercial Banking, said: “Business confidence edged up modestly in May, suggesting firms are beginning to steady after April’s decline.
“This month, confidence levels from businesses in the North East particularly stands out. It’s also reassuring to see that increased confidence from the construction sector has brought them more in line with their retail, services and manufacturing counterparts.
“Across the UK, each region and nation presents unique opportunities and drivers of growth – whether that’s clean energy in the North East, advanced manufacturing in the West Midlands or tourism and hospitality in Scotland.
“We’ve seen first-hand what the right financial support and advice can do for ambitious businesses and are keen to continue supporting our customers as they grow – helping Britain prosper.”
For London businesses, the message appears mixed but broadly positive. Economic caution remains, yet many firms continue investing in technology, talent and expansion strategies designed to drive future growth.
