Business pessimism peaks, says Lloyds TSB

Mon, 07 Jan 2008

As the Bank of England prepares to make its monthly decision on UK interest rates on Thursday, confidence levels among UK businesses are at their lowest since December 2002, it has emerged.

An additional reduction in the base rate after last month's cut from 5.75 per cent to 5.5 per cent could help to reverse the spiral of economic pessimism among businesses, commented Trevor Williams, chief economist at Lloyds TSB Corporate Markets.

Research by the Bank has today revealed a 33 per cent fall in confidence levels during December 2007 with the balance of firms feeling more positive than pessimistic for the future swinging from 16 per cent to minus 17 per cent.

Some 51 per cent of companies now feel negative about the outlook of the economy in 2008, the study also found.

"Although slower house price growth and tight credit markets have undoubtedly weakened economic growth, more cuts in official interest rates in the first quarter of 2008 should restore some of the lost optimism among UK companies," Mr Williams said.

The British Chambers of Commerce also reported falling business confidence in a study this month, with the body's director general David Frost commenting attributing the trend to the impact of the credit crunch, the run on Northern Rock and government plans for capital gains tax reforms.
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