UK business optimism jumps as year-long slump ends

Sentiment in Britain’s business and professional services sector became markedly less negative in the current quarter, ending more than a year of declines, but consumer-facing businesses remain downbeat, a survey showed on Thursday.

The Confederation of British Industry’s quarterly services sector survey showed that optimism for business and professional services businesses jumped to -3 in February from -50 in November, its highest reading since August 2024.

By contrast, optimism for consumer services businesses stayed deeply negative at -45, up only slightly from -47 in November.

“With little sign of improvement in consumer services, overall momentum is likely to remain weak – weighing on investment and employment prospects,” said Charlotte Dendy, the CBI’s economic surveys and data manager.

Separate figures from the British Retail Consortium, also released on Thursday, offered some prospect of a recovery as consumer sentiment rose to its highest since June 2025.

“The lift in confidence is encouraging, but fragile. Slow growth and rising unemployment still weigh heavily on the economy,” BRC Chief Executive Helen Dickinson said.

Earlier this month, the Bank of England downgraded its growth forecast for 2026 to 0.9 per cent from 1.2 per cent and on Tuesday finance minister Rachel Reeves will unveil fresh forecasts from the government’s Office for Budget Responsibility.

Unemployment is close to a 10-year high and wage growth is slowing from rapid rates in recent years.

However, purchasing managers’ data has shown a pickup in business activity since the start of the year and a fall in inflation back to target in April is widely expected to limit the impact on living standards.

Past budget statements from Reeves have weighed heavily on business sentiment, especially after she announced a big rise in employment taxes in October 2024.

Reeves has said she does not plan to announce tax changes on Tuesday but the CBI said businesses were still worried about new employment legislation that will make it harder to fire workers and give guaranteed hours to some part-time staff.

“Service sector firms want to see the government continuing to find appropriate landing zones on the Employment Rights Act and accelerating cuts to the regulatory burden – both critical to tackling the high cost of doing business,” Dendy said.

The CBI survey was based on responses from 351 firms between January 27 and February 12, while the BRC data came from an Opinium poll of 2,000 adults.