British businesses are gearing up for a stronger start to 2025, with new data suggesting the majority expect higher sales and more hiring in the new year – welcome news for Labour’s pledge to revive the country’s sluggish economic growth to blow.
Research from Lloyds and KPMG shows that 70 percent of companies expect turnover growth in the first quarter of 2025, which represents an increase compared to the same period a year ago. Lloyds surveyed 1,200 companies and found that almost three-quarters expected higher profits over the next 12 months. One in five respondents predicts that turnover will increase by more than 10 percent, while a quarter expects turnover to increase between 6 and 10 percent.
The city’s financial services sector is also showing confidence in Labour’s plans to boost competitiveness and attract more foreign investment. Two-thirds of 160 financial services leaders surveyed by KPMG say they are optimistic about the government’s new financial services strategy, despite looming pressures such as an increase in employer contributions from April.
“Financial services are the backbone of the UK economy,” says Karim Haji, Global and UK Head of Financial Services at KPMG, noting that half of companies surveyed plan to recruit more staff by 2025. Nevertheless, challenges remain. A quarter of respondents cited higher NI costs as a potential drag on recruitment, while a third warned that finding skilled candidates could still hinder expansion.
Official data showed the UK economy was flat in the third quarter after a strong start to 2024 amid concerns about higher interest rates and global uncertainties. Yet many economists predict that Britain will avoid a recession thanks to expected interest rate cuts next year and an increase in public spending on health and local government. Four cuts to the Bank of England’s base rate could bring it down to 3.75 percent, reducing borrowing costs for businesses, traders said.
Contrary to KPMG and Lloyds surveys, the CBI reported that its members’ growth expectations for early 2025 remain at the lowest level since November 2022, citing continued uncertainty. Regardless, a fifth of companies surveyed by Lloyds say they plan to hire new staff and invest in AI or other digital tools, while a quarter aim to increase wages and upskill current workers.
“The industry will want more details on the government’s competitive strategy in the first half of 2025,” Haji said. “That clarity will help financial services firms plan more effectively to attract foreign capital and strengthen Britain’s global position.”