Businesses prepare for sparse Christmas

Consumer confidence will ebb throughout December and into the New Year, according to an assessment of the High Street by accountants BDO Stoy Hayward.

The prediction, published today ahead of chancellor Gordon Brown's pre-Budget report, is yet more bad news for the UK economy.

It arrives after a string of reports illustrating the hardship facing UK retailers this year, with sluggish economic conditions inhibiting people’s willingness to splash out on non-essentials.

Once again, online shopping provided a much-needed silver lining , growing healthily in recently times. These are not yet factored into government figures but will boost revenues, said BDO.

The group’s service sector output index rose from 99.9 in October to 100.5 in November – thanks in no small way to online sales. The manufacturing output index, on the other hand, fell from 97.5 in October to 96.5 in November, it said.

In 2006 stable house prices and a settling down of oil costs, combined with a benign monetary policy by the Bank of England, will come to the aid of business to some degree.

But BDO warned that today’s pre-Budget report would likely contain revenue-raising policies that could upset businesses in the New Year.

BDO partner Peter Hemington said: "Our latest findings show that UK businesses face a gloomy end to the year as does the chancellor who will almost certainly announce revenue raising measures today.

"However UK plc can look forward to 2006 with some confidence as oil and house prices stabilise and consumer spending rallies."

With consumption waning thisyear, the UK will experience the lowest annual GDP growth since 1992 - far lower than the chancellor's forecasts. Experts predict Brown will miss his public sector borrowing target of £31.9bn this year and as a result expect to see tax rises today.