More than a fifth of British companies intend to increase spending on technology such as artificial intelligence (AI) and automation next year, according to a new survey by the Lloyds Banking Group.
The Lloyds Business Barometer, which surveys 1,200 businesses every month, found that 23 per cent of UK businesses were keen to step up their tech next year, while 21 per cent will be looking to expand their workforces in 2025. The survey findings show an increase in optimism among UK businesses, despite recent disappointing data on the economy.
As 70 per cent of companies expect to increase turnover next year (up from 62 per cent hoping for a boost a year ago), 73 per cent forecast greater profitability. “It is exciting to see that businesses have ambitious plans for next year and are confident of growth," said Hann-Ju Ho, senior economist at Lloyds.
"Overall, businesses have responded well to the changing external environment. While the economic outlook has been challenging, the steps firms are taking to grow should put them in a strong position for success in 2025.”
UK economic growth flatlined in the third quarter of 2024, according to the most recent data from the Office for National Statistics (ONS). The economy unexpectedly shrank in October and inflation also ticked higher in October and November. The Bank of England reduced its growth forecast for the last quarter of 2024 to zero, down from its previous estimate of a 0.3 per cent rise.
Financial services
Meanwhile, in a separate survey, seven in 10 bosses in the UK's financial services sector said they were confident the government’s plans to cut red tape will drive growth and profits next year.
KPMG’s UK Financial Services Sentiment Survey, which tracks sentiment among more than 160 leaders working across the sector, showed 68 per cent think Ms Reeves’s plans to "regulate for growth" and launch the Financial Services Competitiveness Strategy in the spring will go some way to attracting foreign investment into the UK's economically vital financial services sector. Concerns remain over some of the measures announced by Ms Reeves in her budget at the end of October, including the increase in payroll taxes.
“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. “In the first half of 2025, the sector will want to see more details on the government’s competitiveness strategy to really understand how the Chancellor is proposing to work with them on strengthening the UK’s attractiveness as a global financial centre.”
Of the bosses polled, 94 per cent predicted better profitability in the first quarter of 2025, up from 83 per cent of those surveyed in December 2023. However, a significant proportion cited inflation and interest rates, 52 per cent and 41 per cent respectively, as their chief concerns going into 2025.
During her Mansion House speech to the leading figures in the City of London last month, Ms Reeves outlined her plans to reinvigorate and revamp the regulations that govern the UK's financial services sector, which she called the "jewel in the crown" of the British economy. She said the nature of regulation in the wake of the 2008 financial crisis was to stamp out risk-taking, which has now gone "too far" and "has had unintended consequences which we must now address".
