Lloyds: Software Services and Real Estate Drive UK Sector Growth, Despite Broader Output Slowdown

(IN BRIEF) In April 2025, the UK Sector Tracker report revealed that only two sectors (software services and real estate) showed output growth, a slight dip from March but an improvement from January. Despite this, overall output growth expectations softened across nine sectors, although confidence in future growth rose. Automotive manufacturers showed the strongest growth expectations, while software services saw a decline in confidence. Economic uncertainties continue to affect sector performance, but recent global developments may lead to a rebound.

(PRESS RELEASE) LONDON, 20-May-2025 — /EuropaWire/ — According to the latest UK Sector Tracker report, compiled using exclusive PMI survey data from approximately 1,300 private sector companies, two out of the 14 UK sectors reported output growth in April, a slight decrease from March, but still a slight improvement compared to January. Software services and real estate were the only sectors to experience an uptick in output, with software services also reporting demand growth.

Software services saw an output growth reading of 54.5, while real estate followed with 50.4, marking a modest increase compared to earlier months. However, the report highlights that overall output growth expectations have softened across the sectors, with nine sectors reporting lower growth projections.

Demand for software services, measured by new orders, grew to 53.3, although this was slightly lower than the reading of March. A reading above 50.0 indicates sector expansion, while below 50.0 signifies contraction. Despite fewer sectors reporting growth, the number of sectors with an increased level of confidence towards the outlook improved.

The report also highlighted a shift in confidence within the sectors. Automotive manufacturers reported the strongest future output expectations with a significant increase to 73.1 compared to 68.2 in March. However, software services experienced the largest month-on-month decline in expectations, with a drop from 77.5 in March to 63.8 in April.

Nikesh Sawjani, Senior UK Economist at Lloyds, commented: “This month’s report reflects the ongoing impact of global economic uncertainties, yet firms continue to adjust to a changing trading environment. Recent developments, such as the interest rate cut and progress in global trade, could provide a foundation for future improvements in confidence.”

Notes to editors

Output growth: Software services (54.5), real estate (50.4).

Output contraction: Commercial and professional services (47.9), financial service (47.5), household products manufacturing (47.2), technology equipment manufacturing (45.4), industrial goods manufacturing (45.3), transportation services (45.2), healthcare (43.3), chemicals manufacturing (42.6), food and drink manufacturing (38.7), tourism and recreation (37.8), metals and mining (36.8), automobiles and auto parts manufacturing (36.8).

Growing demand, as measured by new orders: Software services (53.3).

Contracting demand, as measured by new orders: healthcare (49.9), financial services (48.4), real estate (47.1), commercial and professional services (44.8), industrial goods manufacturing (44.8), chemicals manufacturing (43.3), transportation services (42.8), household products manufacturing (40.8), technology equipment manufacturing (40.1), metals and mining manufacturing (38.3), tourism and recreation services (37.3), food and drink manufacturing (34.8), automobile and auto parts manufacturing (27.1).

Methodology

The Lloyds UK Sector Tracker includes indices compiled from responses to S&P Global’s UK manufacturing and services PMI® survey panels, overing around 1,300 private sector companies.

The Lloyds UK Sector Tracker monitors the following 14 individual UK sectors: Chemicals, Metals & Mining, Automobile & Auto Parts, Beverages & Food, Household Products, Industrial Goods, Technology Equipment, Tourism & Recreation, Financial Services (this sector has been updated to include banks, insurance providers and other financial services firms), Commercial & Professional Services, Transportation, Software & Services, Healthcare and Real Estate.

Survey responses are collected in the second half of each month and indicate the direction of change compared to the previous month. A diffusion index is calculated for each survey variable.

The index is the sum of the percentage of ‘higher’ responses and half the percentage of ‘unchanged’ responses. The indices vary between 0 and 100, with a reading above 50 indicating an overall increase compared to the previous month, and below 50 an overall decrease. The indices are then seasonally adjusted.

The Purchasing Managers’ Index (PMI) survey methodology has developed an outstanding reputation for providing the most up-to-date possible indication of what is really happening in the private sector economy by tracking variables such as sales, employment, inventories and prices. The indices are widely used by businesses, governments and economic analysts in financial institutions to help better understand business conditions and guide corporate and investment strategy. In particular, central banks in many countries use the data to help make interest rate decisions. PMI surveys are the first indicators of economic conditions published each month and are therefore available well ahead of comparable data produced by government bodies. For further information on the PMI survey methodology, please economics@spglobal.com

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Media Contacts:

Lorna Gilmour: lorna.gilmour@lloydsbanking.com / 020 7356 2374

Calum Anderson: calum.anderson@citypress.co.uk / 0131 460 7922

SOURCE: Lloyds Banking Group plc

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