Money Story

05 July 2009 02:31 BST

Business confidence slumps to new low

Business confidence has fallen to a record low as fears of a recession lead to a pessimistic outlook.

Lloyds TSB Business Barometer for September shows 31 per cent of firms expect their business activity to increase over the coming 12 months, while 23 per cent expect it to fall.

This represents a balance of eight per cent – the lowest figure ever recorded by the barometer – and is a 16 per cent drop from August's balance of 24 per cent.

Firms also have a bleaker outlook on the economy as a whole, with 68 per cent of businesses reporting they are more pessimistic about the future, compared to 20 per cent who are more hopeful - a balance of -48 per cent, well below the balance of -33 per cent recorded last month.

Trevor Williams, chief economist for Lloyds TSB corporate markets, said: "With business confidence at rock bottom, the crucial question is: what will help firms regain faith in their own prospects and in the wider economy?

"One reason for hope is falling interest rates. If it is true that inflation has now peaked, the chances are that the Bank of England will be able to trim rates even further before too long."

Across the sectors, perhaps surprisingly, services firms are the most hopeful of an upturn in future business activity. In total, 36 per cent are expecting an increase and 13 per cent are poised for a decrease – a balance of 23 per cent.

At the other end of the scale, 28 per cent of industrial firms and 27 per cent of distribution companies expect activity to climb, while 29 per cent and 28 per cent respectively, believe it will fall. In both cases that represents a balance of -1 per cent.