New data suggests that British businesses are anticipating a promising beginning to 2025, with a significant majority expecting increased turnover and hiring practices in the coming year. This wave of optimism aligns with the Labour Party's commitments to invigorate the nation's economy, which has been struggling in recent times.
Surveys conducted by financial institutions Lloyds and KPMG reveal that about 70% of companies are forecasting revenue growth for the first quarter of 2025, compared to last year's sentiments during the same period. Specifically, Lloyds' survey of 1,200 companies indicated that nearly three-quarters expect to see higher profit margins over the next 12 months. Notably, one in five respondents project a revenue increase exceeding 10%, while a quarter foresee growth ranging between 6% and 10%.
The financial services sector in the UK is also reflecting this positive outlook, particularly in light of the Labour Party's initiatives aimed at enhancing competitiveness and drawing in more foreign investment. According to KPMG, two-thirds of 160 financial services leaders expressed optimism about the government’s new strategy, even though they face challenges such as rising National Insurance contributions for employers, set to increase from April.
“Financial services are the backbone of the UK economy,” stated Karim Haji, the head of global and UK financial services at KPMG. He also pointed out that half of the companies surveyed plan to expand their workforce in 2025. However, reservations remain; a quarter of respondents highlighted the high costs of National Insurance as a potential hindrance to recruitment, while a third have concerns regarding the availability of skilled candidates, which may impede their growth ambitions.
While official data indicates that the British economy found its footing in the third quarter, after a promising start to 2024, anxiety persists regarding rising interest rates and global uncertainties. However, many economists suggest that the UK is likely to sidestep recession, driven by anticipated interest rate reductions and heightened government expenditure in healthcare and local governance. As reported by traders, four cuts to the Bank of England's base interest rate could reduce it to 3.75%, subsequently lowering borrowing costs for businesses.
In a diverging view, the Confederation of British Industry (CBI) reported that its members' growth forecasts for early 2025 remain at their lowest since November 2022, highlighting ongoing uncertainties within the economic landscape. Notwithstanding this, Lloyds' survey found that one-fifth of companies are inclined to hire new personnel and invest in artificial intelligence or other digital tools, while a quarter additionally aims to raise wages and improve the skills of their current workforce.
“The sector will need more details about the government’s competitiveness strategy in the first half of 2025,” Haji stated, emphasising the importance of clarity for financial services firms as they strategise to attract foreign investment and bolster the UK’s position in the global market.
Source: Noah Wire Services