business optimism — UK business optimism has finally shown signs of recovery, marking a notable shift in sentiment for the first quarter of 2026. According to the latest survey from the Confederation of British Industry (CBI), optimism in the business and professional services sector has risen to -3, a significant improvement from -50 recorded in November of the previous year. This marks the highest reading since August 2024, suggesting a turning point after over a year of declines.
In stark contrast, the consumer services sector continues to struggle, remaining deeply negative at -45, despite a slight uptick from -47 in November. Charlotte Dendy, the CBI’s economic surveys and data manager, expressed concern that the lack of improvement in consumer services could hinder overall economic momentum, impacting both investment and employment prospects.
The British Retail Consortium (BRC) provided some glimmers of hope with separate figures indicating that consumer sentiment has reached its highest level since June 2025. BRC Chief Executive Helen Dickinson noted that while the rise in confidence is encouraging, it remains fragile amid slow growth and rising unemployment.
Macroeconomic factors are also influencing this shift in sentiment. Earlier this month, the Bank of England revised its growth forecast for 2026 down to 0.9% from 1.2%. This comes at a time when unemployment is nearing a ten-year high, and wage growth is beginning to slow after years of rapid increases. Yet, purchasing managers’ data suggests a resurgence in business activity since the beginning of the year, and a projected decline in inflation by April could help ease some pressure on living standards.
Government fiscal policy continues to play a critical role in shaping business sentiment. The upcoming budget announcement by finance minister Rachel Reeves, scheduled for Tuesday, follows past statements that have significantly impacted the market. Following her announcement of increased employment taxes in October 2024, businesses have been wary. However, Reeves has indicated that she does not plan to propose any new tax changes in the forthcoming budget.
Despite the potential for stability, the CBI has raised concerns regarding new employment legislation that could complicate hiring and firing practices. Dendy emphasised the need for the government to address the Employment Rights Act and to expedite the reduction of regulatory burdens, both of which are essential for alleviating the high costs of doing business.
The CBI survey was conducted between January 27 and February 12, involving responses from 351 firms, while the BRC data was collected through an Opinium poll of 2,000 adults. As business leaders navigate these mixed signals, the focus remains on sustaining the momentum gained in the professional services sector while addressing the ongoing challenges in consumer services.
