Money News
Firms' confidence in the state of the UK economy has fallen for the sixth consecutive month and has now hit a 6-year low, according to the latest Lloyds TSB Corporate Markets Business Barometer.
When asked about their optimism regarding the general economy, 51% of firms said they were more pessimistic than three months ago, compared with just 28% who felt more optimistic. The net balance of firms feeling more, rather than less, optimistic was minus 23% - the lowest recorded in the life of the 6-year survey.
However, when asked about their own business prospects, 58% of firms are expecting business activity to increase over the next year - just 10% anticipating a decline. Although this represents a slight month-on-month decline (the net balance fell by 1% to +48%), there are encouraging signs within the sectors. Indeed, sentiment among some firms improved in February, with the net balance of firms feeling more rather than less confident rising by 9% for distribution firms and by 8% for industrials. Service sector firms, however, were less confident, with the net balance of firms expressing optimism about their own activity falling by 21%.
Trevor Williams, chief economist, Lloyds TSB Corporate Markets, said: "Firms' concern over the wider economy has not been helped by the spate of weakening economic news coming from the housing market and falling consumer confidence.
Williams added that there's likely to be little comfort on interest rates either, as elevated inflation expectations are becoming a noose around the Bank of England's neck, preventing the MPC from making large cuts in official interest rates at a time when there is no fiscal slack to significantly boost the economy.
"Although this year is likely to be a challenging one for many businesses, we expect confidence to improve in the second half and economic growth to accelerate in 2009," he noted.
17 March 2008 © Moneyextra.com
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