Business confidence falls yet trading expected to pick up

BUSINESS confidence plummeted into negative territory in Lloyds’ August barometer, published this morning.

While one in three (34 per cent) companies said they were “more optimistic” about economic prospects than three months ago, more (37 per cent) said they were less optimistic -- leaving a negative balance of minus three per cent.

The net balance of businesses feeling optimistic dropped a dramatic 22 points for this month to -3, following a fall of 17 points the previous month -- an eye-watering 39 point fall over two months.

Between July and August alone, the proportion of less optimistic firms for August rose 10 per cent.

“The fall in business confidence in our latest survey reflects concerns about slowing global growth, the US ratings downgrade and the ongoing euro area sovereign debt crisis,” said Lloyds’ chief economist Trevor Williams.

Down 16 points from July, the net balance for firms’ trading prospects for the next 12 months fell to 30 per cent, remaining positive. Nearly half (47 per cent) of surveyed companies predict trading prospects to improve in the coming year, with 17 per cent anticipating worse prospects to come.

“Although businesses indicated that economic prospects have weakened, they remain positive regarding trading prospects for the year ahead,” Williams added. “As such, we expect the economy to continue to expand in the second half of this year, albeit at a more moderate pace than previously anticipated.”