Business confidence slumps for second month running

 

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Confidence among British businesses has slumped over the summer months, new figures reveal today, adding to the concern that the economic recovery has stalled.

Lloyds Bank, which produces monthly surveys of businessconfidence, said there had been a dramatic slump in sentimentduring August – the second consecutive month in which there has been such a marked decline.

Only 34 per cent of companies say they are now more optimistic about the economic outlook for the country, down from 46 per cent in July, while 37 per cent described themselves as lessoptimistic, up from 27 per cent a month before. That equates to a 22-point drop in the overall net balance of firms feeling optimistic, to -3.

The deterioration in sentiment appears to be speeding up, asfurther worrying economic data is published. The July collapse in business confidence, as measured by Lloyds' "Business Barometer", was 17 points.

With businesses making crucial investment and recruitment decisions on the basis of howconfident they feel about the outlook, a decline in confidence makes it almost certain thateconomic growth in the second half of the year will be weaker than previously thought – though Lloyds said it still believed the economy would grow over the next few months.

On their own trading prospects, 47 per cent of companies expect to see an improvement over the next 12 months, compared with 52 per cent in July, while 17 per cent foresee a deterioration, up from only 6 per cent a month ago.

"The fall in business confidence reflects concerns about slowing global growth, the US ratings downgrade and the ongoing euro area debt crisis," said Trevor Williams, the chief economist of Lloyds Bank Corporate Markets.

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