UK business confidence is rising but it's not party time just yet

Something curious and rather unexpected is happening. Two prominent surveys of UK business confidence, published in recent days, show that optimism is rising strongly.
At a time when firms have just been clobbered with a big increase in national insurance (NI), that is something of a surprise. Yet, sure enough, Lloyds Bank's business barometer showed an 11-point rise in May to its highest level for nine months, with optimism about the economy up by 16 points.
Nine of the UK's 12 regions and nations reported stronger business confidence, the survey showed, with the biggest rises being in Northern Ireland, the East Midlands and the South-West, and significant gains also in Wales and Yorkshire & the Humber.
The Institute of Directors (IoD) also revealed a strong rise in confidence for last month, with its main measure rising by 16 points, also to the highest since August last year. Firms are concerned about higher employment taxes but slightly less than they were, and worries about the economic outlook have abated to an extent.
Investment intentions and export prospects both showed an improvement. It is not yet party time, and confidence remains below where it was at the time of last summer's general election. But as Anna Leach, chief economist at the IoD, puts it: 'It's good to see a recovery in business confidence under way, with our headline measure moving up three months in a row.'
At Lloyds Commercial Banking, senior economist Hann-Ju Ho said: 'The rebound in business confidence suggests that firms might be in a stronger position for the next quarter. The rise in confidence is driven by a sharp increase in economic optimism, reflecting the recovery in financial markets amid the easing of global trade tensions.'
Firms have had plenty to worry about in recent months, including those higher taxes but also, most notably, the threat of a global trade war, triggered by America's lurch towards the most protectionist policies since the 1930s.
President Trump's 'liberation day' tariffs, unveiled on April 2, confirmed the worst fears of many businesses. The recovery in confidence in the past few weeks is thus mainly a reflection of the fact that business people decided those worst fears were perhaps not justified. Not only did Trump announce a 90-day pause in most of the tariffs, he or his negotiators reached an accommodation with China on lower tariff rates, for now at least. US tariffs on imports from China were reduced from 145 to 30 per cent. Not only that, the British government signed a trade deal with America, as well as a 'reset' deal with the European Union and a new deal with India. Things, it seemed, were not so bleak after all and a descent into the abyss had been avoided.
Except, of course, we are dealing with a US president whose love for tariffs appears to know no bounds, notwithstanding the fact that they will badly damage the US economy, hit American consumers hard and are the biggest current threat to the global economy.
The perception that Trump will always draw back when the extent of the damage becomes apparent or when he is forced into it by the treasury market — the market for US government bonds — has not just buoyed UK business confidence. It helps explain why America's S&P 500 equity market index is up nearly 20 per cent from its lows in the wake of the April 2 tariff announcement. On Wall Street, as you may know, they have an acronym for this, Taco (Trump always chickens out) and I had to admire the reporter who put this to him during an Oval Office press conference, prompting a long, hurt and somewhat confused response.
We know, however, that Trump can do and say some stupid things without provocation and the risk is that the 'Taco' label, now he knows about it, is like poking a hornets' nest. Within days, in a speech in Pittsburgh, he announced a doubling of steel and aluminium tariffs to 50 per cent. A defeat for his 'state of emergency' general tariffs in the US Court of International Trade appears only to have emboldened him.
The tariff danger is not yet over. It is not, of course, the only danger. With the UK government's public expenditure review looming, businesses are only too aware that all the pressure is for higher spending, not lower taxes. Curbing winter fuel payments was never going to save much money, so a U-turn on that is more of a political than an economic issue. Taken together with pressure to scrap the two-child benefit cap and reverse cuts in disability benefits, however, it starts to add up to real money.
An even bigger issue is defence spending, and the hole in this week's strongly worded strategic defence review — the question of where the extra cash is coming from to pay for Britain's enhanced needs — is big enough to be seen from outer space. Some firms will benefit from higher defence spending, and the government has emphasised the potential economic benefits, but others will fear that they have to pick up the bill.
At a time when the public finances are already under pressure, even with the big increase in employer NI announced last year and implemented in April, businesses have reason to be worried. They can take comfort from the prime minister's comment this week that you can't tax your way to economic growth and, to a lesser extent, Rachel Reeves's assurances that she would not be repeating last year's big tax-raising budget this autumn.
Such assurances only go so far, however, particularly when taken alongside the chancellor's apparent determination to avoid direct tax increases on 'working people'. Businesses will be hoping that history does not repeat itself and that any action to fix the public finances can be delayed. Who knows, maybe by then the 'growth fairy' will have come along and waved her magic wand. But when it comes to tax, firms have learnt not to rely on fairy tales.

Try Our AI Features

Explore what Daily8 AI can do for you:

Learn with AIFact CheckingText to SpeechAI Summary

Related Articles

The Independent

2 hours ago

• The Independent

Arrest after suspicious device thrown into Belfast Islamic Center during evening prayers

Police are investigating a suspected hate crime after a viable device was thrown through a window of the Belfast Islamic Centre during evening prayer. The incident, which occurred while worshippers were inside, led to the cordoning off of the scene overnight, with the public advised to avoid the area. Local politicians have swiftly condemned the "cowardly" attack, emphasising that individuals should feel secure in their places of worship. Northern Ireland Secretary Hilary Benn expressed his deep concern, calling the act "shameful". 'Hatred of this sort has no place in Northern Ireland. If anyone has any information about this, please contact the PSNI,' he said. Police said they attended a security alert on University Road in south Belfast on Friday night after receiving a report at around 10.10pm. A 34-year-old man was arrested under the Terrorism Act and is being held in custody. 'Police received a report at approximately 10.10pm on Friday 20th June that an object had been thrown through a window at a property in the University Road area of the city,' Assistant Chief Constable Anthony McNally said. 'Officers attended and carried out a search of the building where a suspicious device was discovered. 'Ammunition technical officers attended and examined the object which was determined as viable and has since been removed for forensic examination. 'A 34-year-old man was arrested under the Terrorism Act at the scene and remains in police custody at this time. It is important to stress that, while the suspect has been arrested under the Terrorism Act, the motive for the attack has not yet been established. 'Detectives from serious crime branch are currently working at pace and are exploring a number of potential motivating factors including the possibility that this is a hate crime. 'At this time, no other persons are being sought in connection with the attack.' Alliance MLA for South Belfast Paula Bradshaw condemned the attack, which she said did 'not reflect the diversity of south Belfast in 2025'. 'This attack was again designed to cause fear among people inside the centre, who were at prayer at the time. 'Nevertheless, I am thankful for the intervention of a nearby passer-by and for the work of the police. Those were much more reflective of the true spirit of Belfast, where most people rejoice in diversity. 'I would like to express my solidarity with all those who were evacuated and my thanks to all those who worked to ensure their safety.' Sinn Fein MLA Deirdre Hargey said 'no-one should ever feel unsafe in their place of worship'. 'Acts like these, fuelled by hate, spread fear and division, and target people who have come to our communities to build a life and call this place home. 'It's vital that all political leaders speak out and stand united against this disgusting behaviour.' Green Party councillor Aine Groogan condemned the attack as a 'cowardly and vicious act'. 'I am horrified to hear about the attack on the Islamic Centre during evening prayers,' she said. 'I want to pay tribute to the courageous passer-by who intervened and prevented what could have been a far more tragic outcome. 'It is terrifying to consider what might have happened and I sincerely hope that all those present are recovering from this traumatic ordeal.' She added: 'This attack is yet another reminder of the very real danger faced by our Islamic community. The recent rise in racist hate and violence on our streets is a shameful stain on our society. 'We must all take responsibility for actively challenging racism, misinformation and bigotry wherever it appears before someone is seriously hurt. 'I urge those politicians who continue to hide behind the notion of so-called 'legitimate concerns' around migration to reflect on the consequences of their words. 'Such narratives are as disingenuous as they are dangerous. They help foster a culture in which hate can thrive. Frankly, they should know better.' Anyone who was in the area at the time or who may have information is being asked to contact authorities on 101, quoting reference number 1808 20/06/25. A report can also be submitted online using the non-emergency reporting form on the PSNI website, or people can contact Crimestoppers anonymously on 0800 555 111 or online.

BBC News

2 hours ago

• BBC News

Anti-racism rally held at Belfast City Hall

Protesters gathered at Belfast City Hall on Saturday for a demonstration against Stand Up to Racism rally was co-organised by United Against Racism Belfast, Reclaim the Agenda and the trade union said the march was to show solidarity with migrant workers and Ireland has seen disorder and a spate of racist attacks in recent weeks. The violence started nearly two weeks in Ballymena, County Antrim after a peaceful protest over an alleged sexual assault in the disorder later spread to other areas including Larne, Londonderry, Belfast and Portadown on subsequent nights. Speaking at Saturday's anti-racism rally at Belfast City Hall, Helen Crickard from Reclaim the Agenda said it was about education not violence."We are disgusted violence against women and girls is being used in this way," she the same location there was also an anti-immigration rally. Police vehicles were present to separate the two anti-racism rally was hosted by Northern Irish actor Lola Calvert was among members of the public who attended."It's important to set an example. It's important for my kids to see me show solidarity with people who are here for sanctuary," he said.

Telegraph

4 hours ago

• Telegraph

How expats can avoid a financial headache when returning to the UK

Have you moved back to the UK from abroad and faced difficulties sorting your finances? Get in touch money@ In 2024, as many as 77,000 Britons left the UK, according to government figures. But whether it was in search of adventure, love or work, it won't be a permanent move for many, with estimates suggesting that around 30pc of expats will return home within three years. It doesn't matter how good the weather or lifestyle is, the pull of home can be strong. If you've got children, you might want them to be schooled here, while older expats may want to return to family, friends and free healthcare. However, those expats who make the move back to the UK can find that their return is fraught with financial challenges – especially if they didn't keep a UK bank account or maintain a property at home. 'Returning British expats can face hurdles when re-establishing their financial footprint in the UK,' says John Webb, the consumer expert at Experian. 'One of the main challenges is the lack of recent UK credit history, which can affect applications for things like phone contracts, credit cards and mortgages. 'If lenders don't have much information to assess your creditworthiness, it can make getting credit at good rates more challenging. This can often be the case for returning expats who have something called a 'thin file'.' You'll also need to think about tax, your pension and any investments too. Here Telegraph Money explains the obstacles you might encounter, and shares some ideas for how to ease the move. Finding a home and getting a mortgage Be realistic about your finances Register to vote Open a UK bank account Get a SIM-only phone contract Take out a credit card Transferring pensions Managing tax and investments Finding a home and getting a mortgage Laura Doulton, of Clifton Private Finance, says returning expats are often treated as 'mortgage pariahs' by mainstream lenders. 'Even if they've been earning good salaries and paying rent or mortgage payments abroad without issue, UK banks view them as high-risk because they lack a recent UK credit history. Many discover their excellent credit record from living in Dubai or Singapore means nothing to a UK lender.' However impressive your overseas career might look on LinkedIn, it might not be enough to wow lenders. 'Lenders want to see stable UK employment, but returning expats may be starting new jobs or working for international companies with complex pay structures. This creates a Catch-22 situation where they need a UK address to get a mortgage, but need a mortgage to secure that address.' The key is to give yourself time and consult a mortgage broker who specialises in dealing with expats. 'We guide clients to provide comprehensive documentation of their overseas financial history and work with lenders who will consider foreign income and employment contracts,' says Doulton. Louis Levine, a senior mortgage broker at UK Expat Mortgage, a part of Orton Financial, agrees. 'The other hiccup can be that you're starting a new job that hasn't commenced yet, so we often need to prioritise lenders that are more flexible on credit history and can accept only one month's payslips as income evidence for example. Private banks are much more lenient on this for the right clients.' Doulton says she recommends clients kick the process off around four to six months before they come home. Alternatively, you can consider renting first but, as Levine points out, 'with most rental contracts lasting a minimum of 12 months (or six months at best) it's a logistical complication'. Be realistic about your finances Before you start looking for homes, it's important to think about affordability – both in terms of how much property costs in the UK and the level of disposable income you will have, after HMRC has taken its slice. Doulton says it's not unusual for clients to suffer affordability shocks, particularly those who are returning from tax-free jurisdictions such as the UAE or countries with significantly lower tax rates. 'Someone earning £100,000 in Dubai takes home considerably more than someone earning the same in London. When they return, their net income can drop by 30-40pc immediately due to UK tax obligations.' She adds: 'It's important to note that if a client returns to the UK but continues to earn in say dollars or dirhams, lenders will apply a haircut to their income to allow for currency fluctuation, so this can affect their borrowing power further.' Register to vote In addition to giving you the opportunity to vote in local and national elections, joining the electoral roll can boost your credit score – helping you get everything from a phone contract to a credit card or mortgage. To register to vote, you will need an address, which could be problematic if you don't yet have a permanent residence. If you were registered to vote as an overseas voter, you will still need to re-register once you have a permanent address back in the UK. Open a UK bank account Many expats keep a UK bank account, but if you haven't, you'll need to prioritise opening one as soon as you can. 'Once on the electoral roll, use this to apply for a UK bank account,' suggests Levine. 'Ensure it's an account that reports to UK credit rating agencies like Experian.' Depending on the bank, you may be able to open a UK current account before you arrive. HSBC, for example, lets you have accounts in different countries and lets you easily transfer money between them. Get a SIM-only phone contract A new phone contract will be crucial in helping you find your feet when you first get back, but you might encounter a problem with some deals. 'Phone contracts often require a credit check, and without a recent UK credit history, providers may be hesitant to offer a contract. Starting with a SIM-only deal can be easier, and help build your credit profile,' says Webb. Take out a credit card Spending money on a credit card and making timely repayments, can be a helpful way of padding out a thin credit history and give your score a boost. 'It's a good idea to look for a credit builder card, which is designed for people with limited credit history,' says Webb. 'Using it responsibly – keeping balances low and making payments on time – can help demonstrate reliability to lenders.' Most comparison sites will also be able to tell you which cards you'll be eligible for, without damaging your credit score. Transferring pensions If retirement is still a long way off, what you need to do with your pension might not feel immediately pressing – especially when you're dealing with challenges such as finding somewhere to live. Nonetheless, it's something that needs attention sooner rather than later. David Denton, of financial planners Quilter Cheviot points out that lots of returning expats believe that their pensions will seamlessly follow them, wherever they go. The reality, he says, is much more complex. 'If you've built up an overseas pension, you'll need to understand the local rules around transfers and whether your scheme qualifies for a transfer to a UK-recognised provider. Not all overseas pensions are eligible, and tax charges can apply if you get it wrong. 'A financial adviser who specialises in cross-border planning can help you obtain the scheme documentation, explain your options, and model the impact of transferring versus leaving it where it is.' The UK state pension Your entitlement to the UK state pension, meanwhile, will depend on how many years of National Insurance contributions you'll have under your belt when you eventually reach state pension age. To get the full amount, you'll need 35 years. If you have between 10 and 35 years, you'll get a pro rata payment. You'll only end up with no state pension in the UK if you rack up less than 10 years of contributions (either by way of payments from earnings or credits if you were claiming certain benefits). That means it's important to get a state pension forecast to find out where you stand. Denton adds: 'You may be able to make voluntary contributions to fill in any gaps and boost your entitlement.' However, while your entitlement to the UK state pension may have been impacted during your absence, you may have been building up entitlement to an overseas scheme. Denton explains: 'If you've spent time working abroad, you may also be entitled to a state pension from that country. It's important to check whether the UK has a social security agreement with the country you've worked in, as this can affect whether your overseas contributions count towards your UK entitlement or whether you can claim two separate pensions. 'Understanding the interaction between systems is key to avoiding disappointment when you reach retirement age.' He adds: 'For your overseas state pension, it's best to contact that country's pension authority. You'll usually need to provide records of your work history and tax ID. Some countries will coordinate with the UK to streamline claims, while others require completely separate applications, so timing and paperwork can get complicated without help.' Managing tax and investments What could give you an even bigger headache and a shock is tax. Denton warns: 'If you've been in a lower-tax jurisdiction, the UK's income tax, plus things like dividend tax and capital gains tax, can come as a surprise. 'If you've retained overseas assets or income streams, those can also create complications, as the UK taxes you on your worldwide income once you're a resident again. It's crucial to get ahead of the UK tax rules before you return, not after.' Finn Houlihan, the managing director at wealth adviser, AAF Financial, recommends getting specialist tax advice. He suggests starting the process 12 to 18 months before you come home. 'It would be reasonable to assume that the date you will become a UK tax resident would be the date you physically arrive in the UK. However, this would be far too simple for the UK tax authorities. The date you become a UK resident is dependent on your particular circumstances and is assessed under legislation known as the Statutory Residence Test (SRT).' The basic rule for the SRT is that an individual will be resident in the UK for a whole tax year. However, he adds that there are certain circumstances where 'split-year treatment' can be claimed. 'For example, when an individual comes from abroad and starts to work, split-year treatment enables part of a tax year to be taxed as a non-UK resident and the other part to be taxed as a UK resident.' When it comes to investments, Houlihan says that the rule of thumb is to crystallise your gains while you're still non-resident. 'Problems arise if this step is missed and the individual could bring all the gains back into scope of UK tax which could have easily been avoided. The same applies for bank accounts, any interest due should be paid out whilst non-resident.' Before returning home, Houlihan says it's important to work with an adviser to agree the following: Identify the date you will become UK resident for tax purposes. Review all assets and income streams to understand how you will be taxed once you become UK resident. Consider the appropriate restructuring of assets such as pensions, properties, investments and life assurance. Identify and undertake any pre-residence planning opportunities available. He adds: 'Generally most problems can easily be avoided with good planning and advice.'