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Business confidence hits lowest level since 1992, says survey

Falling company profits are denting business confidence according to the latest business in Britain index from Lloyds TSB Commercial.

The survey of over 1,800 UK firms revealed that optimism amongst firms for the next 6 months has hit its lowest level since 1992 when the index began.

July figures show that ten per cent less firms are predicting better than worse order books, profits and sales since January when the figure stood at 18 per cent.

The trend of falling profits, sales and order books encompasses all sectors, with particular emphasis on construction and retail, where the balance of firms expecting higher sales for the first half of the year hit -19 per cent and -22 per cent respectively.

For the first half of 2008, the least affected sectors were transport and communications, with 21 per cent of companies reporting a rise rather than a fall in sales, down from 28 per cent six months ago.

Eastern UK appears to be bucking the trend with order book levels remaining unchanged and London reporting stronger sales balances than elsewhere. The east was also the only region in which more firms increased rather than decreased investment over the past six months. The survey suggests the region’s outperformance could be thanks to the success of high-tech firms based in the eastern region as well as the growth of the business service sector in the capital.

Companies appear to be buoyed by the strength of the pound versus the euro and rising demand in the emerging markets with 22 per cent forecasting higher export orders for the coming six months. This marks a two per cent fall on the last six months.

Lloyds TSB Corporate Markets chief economist Trevor Williams says: “Economic growth is undoubtedly slowing, exacerbated by the global credit crisis and by rising price inflation. But businesses have reasons to be optimistic. While it is true growth is likely to slow from three per cent last year to an average of 1.75 per cent this year, we’re likely to avoid recession this year and next, helped in part by the weakening pound.

“The fact is that companies are proving to be more competitive than in recent downturns, with stronger balance sheets and higher productivity. As wages remain under control and overseas markets continue to expand, it is clear many UK firms are in a good position to see off this challenging period of slower growth.”

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Danny Lovey

Danny Lovey came to mortgage broking late in his career. The sole trader of The Mortgage Practitioner spent many successful years working in the City, first as a stockbroker and latterly as a investment bank trader before circumstance and a shift in lifestyle led him to the world of mortgages.

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