Confidence in economy falls to 6-year low

The number of firms expressing optimism in the UK economy has fallen sharply, according to a survey by Lloyds TSB.

The bank’s Corporate Market Business Barometer showed that the number of companies feeling confident about the economy fell from 35% in January to 28% in March, the lowest level in six years.

However, there was also a fall in the number of companies expressing out-and-out pessimism, from 53% to 51%.

Trevor Williams, chief economist at Lloyds TSB Corporate Markets, said: “Firms’ concern over the wider economy has not been helped by the spate of weakening economic news coming from the housing market or by falling consumer confidence.”

Although interest rates are expected to continue falling this year, the reduction may not be quick enough to restore confidence: “There’s likely to be little comfort on interest rates.” said Williams: “Elevated inflation expectations are becoming a noose around the Bank of England’s neck, preventing the Monetary Policy Committee from making large cuts in interest rates.”

Despite this, Williams predicted that economic growth will pick up next year, and confidence will improve.

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