Business confidence ’stabilises’

Confidence in the UK economy among British businesses fell again in January, a survey said on Tuesday, albeit at a much slower rate.

Lloyds TSB Corporate Markets said a balance of minus 18 per cent of firms was feeling more, rather than less, optimistic in the first month of 2008.

In December the barometer stood at minus 19 points, which represented a fall of 33 points compared to November.

And Lloyds TSB admits that despite a fifth straight drop in confidence, January’s data came as a “welcome stabilisation”.

Trevor Williams, chief economist at the bank, said the situation may have been further improved by last week’s 0.25 point cut in interest rates by the Bank of England.

But he admitted it was “surprising” firms were not more pessimistic given a recent fall in house prices, which is likely to lead to a downturn in consumer spending.

“This suggests there may be pockets of continuing economic growth, which means the assertions of an impending recession are way off mark and continued, albeit slower, growth is more likely,” Mr Williams explained.

Today’s survey also reveals some UK sectors are confident of a lucrative 2008, illustrated by 64 per cent of service firms expecting an increase in their own business activity.

Mr Williams added: “It’s encouraging that confidence in the service sector has risen, given that it is arguably the most exposed to the credit squeeze and most prone to a slowdown.”