Business confidence declines

Firms' optimism about prospects for the coming six months has hit its lowest level since the survey began. The Business Confidence Index for July shows that the balance of firms expecting better rather than worse order books, profits and sales, over the next six months fell sharply to -8%, from 18% in January. However, there are significant variations in the results for different regions and sectors.

Taking order book levels alone, the balance of companies expecting higher rather than lower levels in the coming six months, dropped to zero, from 22% in January. In addition a balance of just 2% of firms are predicting higher rather than lower sales, compared to 28% six months ago, while the balance of companies expecting higher rather than lower profits has fallen from four per cent to -25% - the lowest in the survey's history and the largest half year drop ever recorded.

This lack of optimism about the next six months reflects firms' experiences in the first half of the year. The report - based on the responses of more than 1,800 UK firms - shows that, during the first six months of 2008, a balance of just 6% of companies reported rising, rather than falling sales (37% and 31% respectively).