According to July's Lloyds TSB Corporate Markets Business Barometer, the balance of firms who believe their trading activity will increase, rather than decrease over the next 12 months, has fallen to +22%. This is a 10% drop from the balance in June's Barometer (+32%), but is also well below the average of +51%, over the survey's six year history. In total, two fifths (41%) believe trading will pick up during the year ahead, but a fifth (19%) expect it to decline.
Despite a slight improvement in sentiment, firms' faith in the wider economy also remains in the doldrums. A balance of -37% say they are more optimistic about the economic outlook than they were three months ago (23% are more optimistic, while 60% are more pessimistic). This represents a slight rise on the balance of -40 recorded in June, when 22% were more optimistic and 62% were more optimistic.
Trevor Williams, chief economist, Lloyds TSB Corporate Markets, said: "British businesses are already being squeezed by the rising cost of raw materials and weakening export prospects in the slowing European market, despite a weaker pound. These pressures, together with the bleak outlook for domestic growth, are taking an inevitable toll on firms' confidence in their own ability to do business.
"There's a strong relationship between business confidence and the actual performance of the economy. And, with so many firms remaining downbeat, we can expect UK economic growth to remain weak well into next year."
