Confidence in economic prospects still close to all time low
15 September 2008
Confidence amongst British businesses is faltering in the face of continued economic uncertainty - and remains close to an all time low, according to the latest Lloyds TSB Corporate Markets Business Barometer.
The survey for August shows that economic optimism amongst UK businesses - the factor which weighs most heavily on overall confidence - remains firmly in the doldrums. A balance of -33 per cent of UK businesses say they are more optimistic about prospects for the economy, rather than pessimistic. In total, 20 per cent of firms are more optimistic and 53 per cent are more pessimistic.
In light of these concerns about economic prospects for the coming year, the survey reveals that many companies are expecting weaker levels of business activity. A balance of just +24 per cent expect an increase, rather than decrease in activity - still far below the survey average of +50 per cent.
Across the sectors, distribution firms report the weakest confidence levels, in terms of their own business activity. A balance of just +12 per cent say they expect an increase, rather than a decrease in business activity, while firms in the service sector have slightly better hopes (a balance of +32 per cent). Perhaps helped by a weaker currency, the industrial sector appears to be in the strongest position, with a balance of + 42 per cent saying they intend to boost activity.
Trevor Williams, chief economist, Lloyds TSB Corporate Markets, said: "The cocktail of a weakening in economic conditions and tighter credit means that firms are very likely to trim investment spending even further than they already have. And it's unlikely we'll see a quick turnaround in this trend any time soon, given the worries businesses have about a potential recession."
"However, the recent fall in oil prices and declining input costs in other areas, do give reason for hope that pressure on operating margins may soon start to ease - so there are some signs of respite appearing."
