19th March 2008
Firms' confidence in state of the
UK economy has fallen for the sixth consecutive month and
has now reached a six-year low, according to the latest Lloyds
TSB Corporate Markets Business Barometer.
When asked about
their optimism about the general economy, 51% of firms said
they were more pessimistic than three months
ago, compared with just 28% who felt more optimistic. The
net balance of firms feeling more, rather than less, optimistic
was minus 23% - the lowest recorded in the life of
the six-year survey.
However, when asked about their own business
prospects, 58% of firms are expecting business activity to
increase over
the next year and just 10% anticipating a decline. Although
this represents a slight month-on-month decline (the net
balance fell by one% to +48%), there are encouraging signs
within the sectors. Sentiment among some firms improved in
February, with the net balance of firms feeling more rather
than less confident rising by 9% for distribution firms and
by 8% for industrials. Service sector firms, however, were
less confident, with the net balance of firms expressing
optimism about their own activity falling by 21%.
Trevor Williams,
chief economist, Lloyds TSB Corporate Markets, said: "Firms'
concern over the wider economy has not been helped by the
spate of
weakening economic news
coming from the housing market and falling consumer confidence.
There’s likely to be little comfort on interest rates
either, as elevated inflation expectations are becoming a
noose around the Bank of England’s neck, preventing
the MPC from making large cuts in official interest rates
at a time when there is no fiscal slack to significantly
boost the economy."
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