More doom and gloom as business confidence falls?

A survey has shown confidence slipping for the first time in 18 months. Not the best way to start the year...

by Emma Haslett
Last Updated: 14 Jan 2011
So much for New Year optimism: a new survey has found that business confidence has dropped for the first time in 18 months – and it’s all down to dwindling faith in the domestic market. According to the bi-annual (in the twice a year sense) Business in Britain survey by Lloyds TSB, 57% of businesses say weakening demand at home will pose the ‘greatest threat’ to their business over the next six months. But it's not all bad news...

Unfortunately, it looks like businesses will remain reluctant to put their hands in their pockets, at least for the time being. Just 20% of firms say they’re going to up their levels of investment over the next six months, while 21% say they’re actually going to cut back. Similarly, 15% expect to reduce the number of staff they employ, with just 18% expecting to bring in new recruits - a slight drop on July’s figure. Just over a third are worried about inflation. And to combat rising costs, 29% say they’re planning to increase prices over the next six months.

But it’s not all doom and gloom. On the face of it, the overall BiB confidence index - which looks at how firms are feeling about their sales, order books and profits over the next six months - may look bad, having slipped by 6% since July. But businesses are nevertheless still positive: confidence is at a balance of 24% for sales, 12% for orders, and 0% for profits - which means exactly half of businesses expect to make a profit this year. If, like us, you’re a glass-half-full type, that could be a lot worse.

And while firms are worried about their home markets, they’re a bit more optimistic about overseas trade: 42% said they’ll be able to grow exports in the first half of this year, with another 44% saying they aren’t expecting any drop-off in their exports.

So the picture painted by this survey might not be quite as bad as it first appears. Although, with all those price hikes looming, consumers would be forgiven for feeling rather less positive...

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