UK business confidence drops to lowest since early 2025

10th Jul 2026 09:13

(Sharecast News) - Business confidence across the UK dropped to its lowest level in over a year in June, according to a survey released on Friday by S&P Global, with service-sector firms turning pessimistic about hiring intentions while input costs raise concerns in manufacturing.

The headline reading of the tri-annual S&P Global UK Business Outlook survey, which tracks optimism levels towards private sector output over the coming 12 months, fell to +26% last month from +36% in February.

While still in positive territory - the net balance is the percentage of firms expecting an increase minus those expecting a decrease - this was the least optimistic outlook since February 2025.

Confidence levels in the services sector fell to +24%, its joint-lowest reading since October 2022 (the time of the infamous 'mini-Budget'), with firms citing rising labour costs and low client spending amid global uncertainty.

"Survey responses signal that a triple squeeze from rising labour costs, worries about government taxation and weak consumer demand have made services firms more hesitant to commit to spending, reflected in lower (and negative) confidence levels for hiring, capital expenditure, and research and development," said David Owen, principal economist at S&P Global Market Intelligence.

Sentiment among manufacturers fared a little better, but the sector's confidence reading still fell to +38%, with firms worried about their exposure to global trade disruptions, policy changes in the UK, overseas competition and skills shortages. Meanwhile, manufacturers' 12-month inflation projections jumped to their highest in over four years.

Nevertheless, Owen noted: "There was much more confidence in [the manufacturing] sector that firms could pass on their costs and limit the strain on profits. Survey respondents also suggested they could strengthen their exports volumes, in part to negate the impact of weak domestic sales, as well as benefit from spending growth in areas such as defence, data centres and green energy."