Business confidence starts
to slide
November 2007
UK firms' confidence in their own business
activity has deteriorated for the first time since June,
according to the Lloyds TSB Corporate Markets Business
Barometer.
The monthly survey shows that the number
of companies expecting their business activity to increase
over the next 12 months fell from 70% in September to 64%
in October. This is the first time that confidence has
followed a downward path since June of this year and indicates
that UK economic growth may have peaked, making a base
rate cut in early 2008 increasingly likely.
In addition, UK firms' perception about
the health of the wider economy has weakened, also hinting
that UK output is now past its peak. The balance of firms
feeling more rather than less confident about the state
of the general economy fell to 17% in October, down from
20% in September. This represents the lowest balance of
optimism reported since December 2006 and now sits below
the 5-year survey average.
Trevor Williams, chief economist at Lloyds
TSB Corporate Markets, said: "A strong pound, slower
eurozone growth and higher energy costs are all factors
weighing heavily on business confidence this month, particularly
among manufacturers. Firms with high gearing, weak cash
flows and those dependent on earnings from sectors built
on consumers' discretionary spending will experience the
most anxiety.
"These results indicate that UK
economic growth is likely to slow in the final three months
of 2007. However, although these signs of weaker business
confidence are a concern, the MPC is not likely to make
any knee-jerk rate cuts unless there is actual evidence
of slower growth over a sustained period. Therefore, a
rate cut is unlikely before February 2008."
Across the sectors, the balance of confidence
fell among industrial and service firms but rose among
distribution companies. The balance of firms feeling more
rather than less confident about their own business activity
fell by 26% among industrials, by 7% among service sector
firms but rose by 19% among distribution firms. Similar
trends were seen when asked about each sector's view of
the general economy, with balance trends falling by 22%
for the service sector, 23% for industrials but rising
by 43% for distribution firms.
< back to news
headlines
