Surveys show collapse in confidence

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The Independent Online
Overwhelming evidence of a collapse in business confidence is emerging from the latest clutch of business surveys out this week and coincides with grim forecasts of up to 200,000 more lost jobs by Christmas.

The first to be published since the devaluation of the pound, the surveys include the latest British Chambers of Commerce quarterly report, which indicates that confidence is plunging because of shrinking order books and the drift in the Government's economic policy.

City economists are predicting that the Government will again cut rates to pull the economy back from the threshold of slump, but the price could be a steep fall in the pound.

The BCC report, to be published on Thursday, shows a huge swing in confidence compared with its last survey, in July, which suggested that hopes of a recovery might be taking hold.

Adding to the gloom, the latest Confederation of British Industry survey of distributive trades suggests that retail sales will fall this month compared with levels achieved a year earlier, and will also worsen for the time of year.

The BCC survey is foreshadowed today by a report from the London Chamber of Commerce, which forecasts a further deterioration in the London economy - already facing 'the worst job crisis in the country'.

Simon Sperryn, chief executive, said: 'Business in London is at a low ebb, confidence in the future has dropped and the outlook for investment and employment is bleak.'

The poll of 285 companies with 200,000 employees points to further job losses in both service and manufacturing industry, the bleakest investment outlook for a year and the worst expectations for turnover and profitability in 15 months.

The latest quarterly countrywide survey of small and medium-sized independent companies by 3i, the venture capital group, also reveals a plunge in its confidence index.

A third of the 420 companies surveyed expect turnover to shrink in the next three months and predict they will cut back on investment.

The 3i poll also reveals that many companies are reacting to recession by freezing wages or even cutting pay. A quarter of respondents said that they would grant zero pay rises this year, while a small proportion said pay was being cut.

However, the CBI's distributive trades survey shows that high street sales rose slightly in September compared with a year ago, led by sales of clothing and shoes. This was the first increase recorded by this survey since May, and follows a 0.8 per cent increase in retail sales in August as measured by the Central Statistical Office.

'This is clearly good news,' Nigel Whittaker, chairman of the survey panel, said. 'But retailers fear that October will see September's gains reversed; we are living in a very uncertain economic climate.'

City economists predict that official figures for retail sales, out on Wednesday, will reverse August's gains.

While wholesalers reported that September volumes had increased, motor traders disclosed a decline in sales, and October is expected to see little respite.

The survey also showed that retailers, wholesalers and motor traders are cutting back their stocks rather than placing new orders, worsening the outlook for their suppliers.

The latest batch of economic surveys serves to emphasise forecasts of a mounting toll of job losses. In addition to planned redundancies affecting 30,000 miners, suppliers to the coal industry expect they will have to shed about 120,000 jobs, while BT is cutting 30,000 jobs.

Lucas and British Aerospace will meanwhile join engineering and construction companies planning thousands of job cuts by Christmas.

With the economy possibly poised on the threshold of slump, City economists are forecasting that interest rate reductions could be even more aggressive than the market now thinks.

National Westminster Bank's latest forecast is for base rates to be cut to 7.5 per cent in the next six months, but other economists think this is too pessimistic.

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