Business confidence at six-year low

23/04/2008

Business’ confidence about their future dropped sharply last month as many firms started to feel the pinch of the credit crunch.

According to figures by Lloyds TSB, firms’ confidence about their growth prospects for the immediate future hit a six-year low in March, with just 40% of firms expecting to expand – 8% less than in the previous month.

However, the bank said levels of pessimism varied through the sectors. Confidence in the service sector improved in March, with almost one in seven saying they expected their output to increase over the next twelve months, with the distribution and industrial sectors remaining gloomy about their outlook.

Lloyds said this is the seventh consecutive month confidence levels have fallen, down from +32% in August 2007 to –29% in March.

Trevor Williams, the chief economist for Lloyds TSB corporate markets, said: “As firms become more concerned about the future of the UK economy, it is no surprise that they are starting to revise their expectations for future performance.

“The double whammy of a potential slowdown and the cost of raw materials getting ever higher means firms are increasingly expecting activity to fall.”

“This pessimism is yet to touch all business sectors,” he added. “The services sector remains positive so far, perhaps surprisingly so given the current financial market dislocation.”