Business confidence in Britain has fallen to its lowest level since 2003, a new study from the Institute of Chartered Accountants in England and Wales (ICAEW) will reveal today.
The ICAEW said its index of business confidence had fallen for the third quarter running, but warned the rate of decline had quickened appreciably since the beginning of the year, amid growing concerns that a recession in the US could tip the world into an economic slowdown.
The accountancy body also warned that a slowdown in the housing market and the continuing effects of the global credit crisis had also had a serious impact on business confidence.
The ICAEW's index of business confidence now stands at -7.2, down from -3.9 at the end of last year, and from a high point of 11.5 just a year ago. The measure is based on surveys of chartered accountants that advise businesses around the country.
Michael Izza, chief executive of the ICAEW, said many sectors of the economy were bracing themselves for an extremely difficult 2008 and urged Alistair Darling, the Chancellor, to help with pro-business measures in his Budget next month.
"There is no doubt that 2008 will be a tough year for a number of companies, Mr Izza warned. "[Our] business confidence monitor has been warning of this insecurity amongst businesses for some time – I would urge the Chancellor to deliver a low-key budget that doesn't impose further change on companies who are finding it tough enough in the current environment."
The ICAEW study shows that larger firms, defined as those employing more than 250 staff, are more pessimistic about the outlook for their businesses than smaller companies. The group said this reflected concern among bigger companies, which are more likely to have exposure to international markets, about a global economic slowdown.
Mr Izza said that in addition to help from the Chancellor, monetary policy could be used to stimulate the economy. He said: "Despite the gloom, emerging markets growth and the expectation of interest rate cuts by the Bank of England mean the economy is decelerating in a more orderly manner than might otherwise be expected."