Money News
Despite a marginal fall in optimism among UK businesses in January, the speed of deceleration in confidence has slowed dramatically since the start of the year, according to the latest Lloyds TSB Corporate Markets Business Barometer.
The balance of firms feeling more, rather than less, confident about the UK economy fell by just 1% between December and January. Although this indicates a fifth consecutive monthly decline in sentiment and a new 5-year low, it also indicates stabilisation.
In addition, firms' confidence in their own business activity fell by 1%, although this masks a divergence of fortunes among different sectors. More businesses in the industrial and distribution sectors expect their own activity to fall, rather than rise, over the next 12 months but there has been an upturn in the service sector.
Across the UK, 64% of service firms expect an increase in their own business activity during 2008, compared with 28% that forecast trading to remain constant and just 3% expecting a fall.
Trevor Williams, chief economist, Lloyds TSB Corporate Markets, said: "This survey was conducted before last week's MPC base rate cut so the slowdown in pessimism may improve further once the effect of the cut takes hold.
"It's encouraging that confidence in the service sector has risen, given that it is arguably the most exposed to the credit squeeze and most prone to a slowdown."
Williams added that it's also surprising that, overall, firms weren't even more pessimistic, given the depth of concern about falling house prices and the potential knock-on effect on consumer spending. This suggests there may be pockets of continuing economic growth, which means the assertions of an impending recession are way off mark and continued, albeit slower, growth is more likely.
12 February 2008 © Moneyextra.com
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