UK Business Confidence Slips as Economic Uncertainty Deepens

Business confidence across the UK has weakened at the start of the year, as growing doubts about the wider global economy weigh on sentiment despite signs of resilience at company level. A new survey of firms showed overall confidence edging lower in January, reflecting a sharp fall in economic optimism among executives. Concerns about international trade, geopolitical tensions and policy uncertainty have contributed to a more cautious outlook, particularly as global growth signals soften. While confidence remains above long-term averages, the decline suggests businesses are becoming more guarded in their expectations for the months ahead. The shift highlights the fragile balance facing companies as they navigate external risks while attempting to maintain momentum after a subdued end to last year.

The drop in confidence was driven largely by a deterioration in views on the broader economy, which fell to its weakest level in a year. Executives cited uncertainty in global markets and rising political risks as key factors shaping their outlook. During the survey period, renewed talk of tariffs and trade tensions added to unease among firms with international exposure. Despite this, confidence has not collapsed, indicating that businesses are not anticipating an immediate downturn but are increasingly aware of potential headwinds. Analysts say this cautious tone reflects a wait-and-see approach, as firms assess how global developments and domestic policy decisions may affect demand, costs and investment plans.

In contrast to the weaker economic outlook, expectations for individual business performance improved, with many firms expressing greater confidence in their own trading prospects. Hiring intentions strengthened for the first time in several months, and expectations for wage growth also increased, suggesting companies remain focused on expansion and retention of staff. A growing share of employers expect pay rises of four percent or more, pointing to continued pressure in the labour market. This divergence between macroeconomic caution and micro-level optimism suggests businesses are prioritising controllable factors such as productivity, pricing strategies and operational efficiency, even as uncertainty clouds the wider environment.

Overall confidence remains higher than a year ago and above historical norms, but it has fallen from peaks seen earlier last year when economic conditions appeared more stable. Sentiment has also been influenced by concerns over potential tax changes and fiscal tightening, which have lingered since the autumn budget. Economists say the mixed picture reflects an economy at a crossroads, with businesses showing adaptability but lacking conviction about the broader outlook. The coming months are expected to test whether firm-level resilience can be sustained if global and domestic pressures intensify further.