UK business confidence remained stable in March, maintaining February’s six-month high, as reported by Lloyds Bank. The Lloyds Business Barometer scored 49, slightly below the anticipated 50, with retailers demonstrating strong sentiment amid a surprising rise in February retail sales.
Confidence regarding trading prospects reached its highest since 2017, even with ongoing economic uncertainties. Conversely, manufacturing sentiment declined notably due to concerns reflected in the S&P Global PMI data, with challenges anticipated from upcoming U.S. tariffs and domestic tax increases.
Outlook On Labour And Pricing
Expectations surrounding hiring, pay, and prices have eased, indicating a cautious outlook. The GBP experienced an initial decline but has not persisted at lower levels.
In plain terms, the latest data suggest that firms across the UK are maintaining an optimistic view about their current and near-future trading situations, despite various economic pressures. We saw a 49-point reading on the index, which is close to the prior month and still well above mid-2023 levels. That gives us some continuity and provides a slightly clearer gauge of sentiment than we’ve had in previous quarters. The sharpest contrast came between retailers and manufacturers. Retail sentiment has grown sturdier due to a solid bounce in February sales, showing the consumer isn’t pulling back just yet. Meanwhile, manufacturers appear to be contending with a more hesitant view on what the next quarter could bring.
Whitworth described trading expectations as reaching levels last seen in 2017—not a recent marker—which tells us that firms feel more assured than what the general press might suggest. However, there’s a noticeable gap forming between service-based businesses and those reliant on production and global trade. Weaker PMI figures from the manufacturing side echo that discomfort, tying closely to trade tensions with the U.S. as new tariffs loom, as well as domestic constraints from upcoming tax changes.
More surprisingly, even with the upbeat tone from some sectors, hiring plans and wage expectations didn’t firm up further. Instead, they’ve edged back. This implies that while businesses might feel the worst has passed, they aren’t rushing to expand or increase cost bases. We are still seeing some price push through, but less than earlier in the year.
From where we stand, that moderation in hiring and wage sentiment holds weight for those of us studying futures around labour-linked instruments. It tempers the upward pressure one might have otherwise expected. Also, the pound’s movement—dropping at first but then quickly settling—reflects how limited currency traders believe the knock-on effects will be. There’s a view forming that the Bank of England won’t be pressed to act immediately, which lines up with interest rate swap curves that have gently flattened.
Sector Divergence And Trading Strategy
If we look at wholesale indicators, especially those tied to expectations for input costs or output pricing, the air has begun to thin a touch. We read that as pricing power becoming a bit less dependable. And, as business leaders show reluctance to add headcount, we interpret that as a need to stay agile.
Narrower volatility in sterling shows safer positioning may already be dominant. Short-dated implied volatility has eased, suggesting fewer anticipate sharp changes in direction. This could encourage range-based strategies for the moment, rather than broader directional ones.
Gains in sentiment are still present, but they’re less broadly shared than they appear at headline level. Traders can draw from the clear split between sectors to isolate exposure. We believe that, over the coming sessions, the gap between services and industrials will reflect not just fundamentals, but also differing degrees of geopolitical sensitivity. It’s those details—the sort not found in top-line figures—that give better structure for adjusting exposure.
Watching the confidence data as a whole, one message stays constant: firms aren’t dropping their hands, but neither are they reaching far. This middle ground isn’t uncommon before budget cycles or in months with regulatory uncertainty. It’s best to draw focus to the hard numbers behind these sentiment moves rather than treat confidence metrics as standalone indicators. The forward bias is very much contingent on whether recent data surprises—from sales to wage settlements—repeat themselves through April.
