Firms set to put brake on capital spending

Businesses are planning to slash capital investment spending in response to the UK's weak economic outlook, according to a new survey.

The UK Business Confidence Monitor index, produced by the Institute of Chartered Accountants in England and Wales and the accountancy firm Grant Thornton, shows that the number of firms who expect to boost their capacity over the next year has fallen nationwide.

There were considerable drops in spending expectations from firms in the East Midlands, the North West and also the South West. The survey also found that around 20 per cent of firms have stock levels above normal, pointing to a lack of customer demand.

The overall confidence index steadied, rising to -9.3, up from -9.7 in the three months of 2011.

But confidence is still below the +8.1 seen as recently as the third quarter of last year.

Michael Izza, chief executive of ICAEW, said: "This survey shows that businesses are responding to concerns about the economic outlook by cutting back on investment in equipment and people.

At the moment, it is hard to see where this growth will come from and the Chancellor needs to use the forthcoming budget to give businesses reasons to be more confident about the future – and unlock potential investments."