Firms across Britain are concerned about their prospects for the coming months and plan to freeze investment and raise prices in the face of continuing economic uncertainty, a report has said.
Business confidence has slipped back for the first time in 18 months, according to Lloyds TSB Commercial’s Business in Britain report, driven by an increase in the number of firms concerned that sales and profits might fall this year.
But firms are confident in export markets as a source of future growth, the twice-yearly report added.
The Business in Britain Confidence Index, which tracks 1,800 firms’ views on sales, order books and profits for the next six months, has slipped to a balance of 12% – from 18% in the last survey. This balance is 10% below the average of 22% over the survey’s 16-year history.
John Maltby, managing director of Lloyds TSB Commercial, said that in the face of weakening prospects businesses are toeing a cautious line in terms of investment and recruitment.
He said: “It is easy to understand why businesses are choosing not to invest. Worries about the economic outlook coupled with the fact that most firms aren’t operating at full capacity suggest that, on the face of it, a cautious line on spending may seem to be the right approach.”
The report said only 20% of firms plan to boost investment over the coming six months, while slightly more – 21% – plan to cut back, meaning that the balance of firms expecting to increase investment remained unchanged at minus 1%.
Almost two thirds of businesses – 57% – said weaker home markets pose the greatest threat to their business over the coming six months.
Despite businesses’ almost universal concerns about domestic demand, most are hopeful about the potential for overseas trade, Lloyds TSB Commercial said.
Some 42% of businesses surveyed believe they will grow exports in the first half of 2011 and that business activity will gain momentum this year.