Business surveys continue to deliver contradictory messages as Lloyds and KPMG today report growing optimism just a week after the CBI said companies’ growth forecasts for the start of 2025 are at their lowest for two years.
Lloyds Banking Group’s business barometer, which surveys 1,200 companies, shows nearly three-quarters expect higher profitability in the new year and 70% say that their turnover is on course to grow, against 62% cent a year ago.
The figure includes 92 firms north of the border where the survey shows a slightly higher level of expectation of higher turnover (73%). Nearly a quarter (24%) will be investing in expansion into new UK markets, while a similar proportion (23%) will be investing in staff training.
A separate survey from KPMG reveals growing optimism that Labour’s new financial services strategy will help the UK attract more foreign capital.
Half of financial services firms polled say they will hire more people in the new year, despite concerns about the increase in the employers’ national insurance contributions from 1 April.
“Financial services is the backbone of the UK economy, so it’s encouraging to see leaders go into the new year with optimism about the government’s growth plans for the sector,” said Karim Haji, global and UK head of financial services at KPMG.
The findings of these surveys offer encouragement to Labour ministers after a batch of more pessimistic reports.
Revised official growth figures for the third quarter show there was no growth, with increasing concern that the UK economy is heading for recession. Hopes expressed 12 months ago that 2024 could herald up to six interest rate cuts were dashed by sticky inflation.
The CBI last week issued a particularly stern warning to the government that growth would see the “the worst of all worlds”.
Its Growth Indicator shows pessimism across all sectors and follows a fall in private sector activity in the three months to December. Activity has been flat or falling since August 2022.
Alpesh Paleja, CBI interim deputy chief economist, said: “There is little festive cheer in our latest surveys, which suggest that the economy is headed for the worst of all worlds – firms expect to reduce both output and hiring, and price growth expectations are getting firmer.
“Businesses continue to cite the impact of measures announced in the Budget – particularly the rise in employer NICs – exacerbating an already tepid demand environment.”
Nonetheless, traders are once again looking confidently to up to four interest rate cuts from the Bank of England in 2025, reducing the base rate to 3.75%.
