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Business confidence plummets

18/08/2008

Business confidence has fallen sharply as firms' confidence in their own prospects falls to a new low, a survey has found.

Lloyds TSB business barometer shows the balance of companies who believe their trading activity will increase, rather than decrease over the next 12 months, has fallen to just 22 per cent.

This is a ten per cent drop from the balance in June's barometer (32 per cent), but is also well below the average of 51 per cent, over the survey's six year history.

Previous surveys had suggested that, although businesses are had lost confidence in the economy as a whole, their confidence in their own performance had been higher.

Trevor Williams, chief economist, Lloyds TSB Corporate Markets, said: "British businesses are already being squeezed by the rising cost of raw materials and weakening export prospects in the slowing European market, despite a weaker pound.

"These pressures, together with the bleak outlook for domestic growth, are taking an inevitable toll on firms' confidence in their own ability to do business."

Despite a slight improvement in sentiment, firms' faith in the wider economy also remains low. A balance of -37 per cent say they are more optimistic about the economic outlook than they were three months ago (23 per cent are more optimistic, while 60 per cent are more pessimistic).

This represents a slight rise on the balance of -40 recorded in June, when 22 per cent were more optimistic and 62 per cent were more optimistic.

Mr Williams concluded: "There's a strong relationship between business confidence and the actual performance of the economy. And, with so many firms remaining downbeat, we can expect UK economic growth to remain weak well into next year."