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Businesses pessimistic about their prospects

British businesses are increasingly pessimistic about how they will fare in the coming year, according to Lloyds TSB.

The bank’s latest corporate markets business barometer recorded a sharp decline in optimism among businesses in May.

Only 24 per cent of firms expected their trading conditions to improve over the next 12 months, down from 42 per cent in April. This is the lowest level since the survey began in 2002.

The distribution sector suffered the biggest confidence crisis, down 19 points to 22 per cent, and services businesses were close behind, down 19 points to 34 per cent. But manufacturing firms bucked the trend with a rise of four points to 41 per cent.

Surprisingly UK businesses were more confident about the prospects for the economy as a whole, compared with their own companies. After plunging to a record low of -51 per cent in April, the balance of businesses feeling more optimistic than pessimistic about general economic prospects shot up by 20 points to -31 per cent last month.

This level of optimism is still the second weakest recorded in the survey’s history but it brings to an end a period of declining confidence which began in September last year.

Chief economist Trevor Williams says: “Business confidence has suffered a real blow this month. It’s clear that firms are concerned about their prospects and that doesn’t bode well for investment and employment. The improvement in businesses’ hope for the wider economy is something of an anomaly. But after so many months in negative territory, any upturn in their outlook is definitely welcome news. We’ll need to wait and see what the next few months bring, before we can say with certainty that this improving outlook is more than just a blip.”

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