Confidence dips as realism kicks in

Business confidence has fallen for the first time in two years, raising further questions about the momentum of the recovery.

Ahead of a vote by the Bank of England’s Monetary Policy Committee on interest rates this week, the latest confidence monitor from ICAEW/Grant Thornton gave a reading of 32.3, down from 37.3 in the second quarter of 2014.

“Businesses are becoming more realistic about the future,” said Stephen Ibbotson of the ICAEW. “The imbalances in our economic recovery that were masked by rising confidence continue to persist – our exports remain weak, and investment isn’t maintaining momentum. "

"We look to the Bank of England and the Government to work harder to ensure that the recovery is placed on a broader footing before we see this still relatively high optimism erode away.”

On Thursday, the MPC is set to take a decision on whether to raise interest rates from their historic lows of 0.5 per cent. Although no member has voted for an increase since July 2011, experts believe at least two of its members, Martin Weale and Ian McCafferty, will vote for a rise.

The ICAEW/Grant Thornton confidence index, which has been running since 2005, has been steadily rising since the second quarter of 2013. In the depths of the global financial crisis in 2009 it hit lows of minus 45.