Business confidence remains weak

The survey, which captured the views of businesses in March, showed the balance of firms that expected higher, rather than lower, activity levels over the next twelve months increased just one percentage point to -4 per cent from -5 per cent in February.

Although the number of firms that expected activity to grow, fell in March, fewer firms also predicted activity would decline. Twenty two per cent of respondents said they expected activity would increase, compared to 32 per cent in February. But 26 per cent expected activity would fall, versus 37 per cent in February. Forty six per cent expected no change, up from 28 per cent in February.

The survey found the smallest firms were the most optimistic about business activity levels. Respondents with a turnover of £1-5 million increased their balance by 14 percentage points to zero. In contrast, firms with a £20 million plus turnover expected a sharp contraction in their business levels over the next twelve months, demonstrated with a 34 percentage point decline in their activity balance to -29 per cent.

For the sixteenth consecutive month, more firms said they were pessimistic, rather than optimistic about the economic outlook for the UK. This caused the economic optimism balance to deteriorate to -16 per cent in March, from -13 per cent in February.

Looking at the sector breakdown, business confidence among industrial firms surprising jumped in March to 13 per cent, up 42 percentage points from February, possibly reflecting a weaker currency. But business confidence among distribution firms fell 15 percentage points to 6 per cent in March, tallying with weak official retail sales figures, while the service sector business confidence balance fell 9 percentage points to -17%.

Trevor Williams, chief economist, Lloyds TSB Corporate Markets, said: "These figures suggest the economic situation is still deteriorating, but the pace of decline is easing. In March, fewer smaller firms and those operating in the industrial sector expected output to fall. But the overwhelming majority of respondents expected even deeper cuts. Our findings mirror those of other recent surveys, suggesting there will be further deep contraction in UK economic output in coming months."