Confidence levels slip but double-dip unlikely – Lloyds

BUSINESS confidence levels in the Midlands have slipped but the prospect of a double dip recession looks unlikely, according to new research by Lloyds TSB Corporate Markets.

The bank’s latest Business Barometer suggests confidence levels in the Midlands and the South have fallen considerably in recent months amid fears of declining growth.

However, there is a mixed message from companies as businesses in the north of the country are still relatively optimistic about events.

The barometer, a monthly snapshot of business sentiment, shows that confidence levels in September slipped to their lowest levels since March 2009.

The overall survey balance dropped 15 points to 9%, as a result of both a rise in the number of businesses saying they are more downbeat about the economic outlook (32%) and a fall in the number of firms saying they are optimistic (41%).
 
The barometer has established itself as a strong indicator of GDP growth. The latest survey suggests GDP could slow to around 0.1% by the end of the year.
 
Larger businesses, with greater exposure to the services sector, have reported weaker confidence about their economic prospects in recent months, likely due to the impending public sector cutbacks. However, smaller firms have proved to be more resilient.

The overall confidence balance for businesses, with a turnover of more than £25m, was 13% last month – down from a high of 46% in April 2010. At the same time, the balance for small firms with a turnover of up to £15m was 29% – down from 47% in April.
 
The drop in confidence is mirrored across the three main business sectors. The lower confidence balances in the services (11%) and distribution sectors (23%) partly reflect concerns about the impact fiscal tightening will have on domestic demand. Confidence has also slipped amongst industrial firms (18%) but the sector is proving more resilient than others; buoyed by the rebound in global trade and the weaker pound.
 
Trevor Williams, chief economist, Lloyds TSB Corporate Markets, said: “The debate over the likelihood of a double dip recession in the UK is intensifying. The barometer has proved to be a reliable guide to future economic growth and with confidence slipping as it has done, we can expect GDP to slow quite markedly before the year is out.  
 
“Despite the overall decline in optimism, there is still hope for companies across regions and sectors that are benefiting from growing exports and a weaker pound.”

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