Business confidence at record low

British business confidence has hit an all-time low, with a record 70 per cent of firms pessimistic about the UK's prospects.

Only 19 per cent of companies reported feeling optimistic about the economic growth, according to the latest Lloyds TSB corporate markets business barometer.

This is the lowest level since the monthly survey began in January 2002.

However, businesses are still confident they can face the challenges ahead. The survey shows the confidence of some firms – particularly those in the industrial or distribution sectors - in their own prospects for the next twelve months has actually risen.

The balance of firms reporting rising, rather than falling, confidence over the next year has risen to +42 per cent, from +40 per cent last month.

Lloyds TSB economist Trevor Williams said: "With inflation on the rise, it's highly unlikely the Bank of England (BoE) will be cutting interest rates any time soon – and that may be weighing heavily on some businesses.

"While there are some firms who remain upbeat about the year ahead, that's mainly because they are expecting higher exports, as a result of a weakening pound and good overseas order books," he added.

"But the reality is most British businesses are worried about their prospects as the economy weakens."

High commodity costs are pushing up inflation for firms, while the credit crunch is making borrowing difficult for UK businesses.

The figures are in stark contrast to last year, when only 14 per cent of firms expressed pessimism in the economic climate, and represents a dramatic rise from last month when 52 per cent were pessimistic.

Sarah Routledge