UK Business Optimism Remains Weak

Business sentiment in the UK deteriorated in January, with manufacturers optimism about both the business situation (-19%) and export prospects (-12%) declining. However, sentiment is now the least negative since July 2024. Confidence is being undermined by falling output and a sharp decline in new orders, as customers delay decisions and limit spending, leaving order books thin. This lack of demand visibility is the main constraint on confidence and is holding back investment plans. Although cost growth has slowed, high wages, energy prices and taxes continue to squeeze margins. With capacity utilisation and employment still falling, confidence remains subdued, highlighting the need for lower business costs and clearer policy to support recovery.

Sentiment in the UK manufacturing sector fell to -33 in April of 2025 according to the index compiled by the Confederation of British Industry, extending the deterioration of -47 from the previous moving quarter to mark the fourth consecutive quarter of pessimism. Manufacturing output continued to decline (-2 vs -18 in January), and surveyed firms noted that production levels are likely to continue decreasing halfway through the year (-5). Consistently, new orders remained firmly in the negative territory (-13 vs -20) amid lower demand both domestically (-11 vs -23) and from foreign markets (-4 vs -33), driving firms to continue shedding jobs (-16 vs -8). On the price front, input costs accelerated (48 vs 43), and is expected to continue rising through July (53).