Lloyds survey shows business confidence slumped in May – but consumers are feeling brighter

UK households' real disposable income has fallen, according to the ONS.
Picture: James Bass

UK households' real disposable income has fallen, according to the ONS. Picture: James Bass - Credit: Eastern Daily Press � 2013

Confidence among British businesses has slumped to an eight-month low in May as firms worry over their prospects, according to a survey.

The latest Lloyds Bank Business Barometer showed overall business confidence plunged to its lowest level since last September, with a net balance of 27% marking a sharp reversal of the 17-month high of 47% seen in April.

The drop came amid growing fears over outlook, with a steep decline in firms expecting stronger business prospects – plunging to 39% from 61% in April.

The report, which surveyed around 200 UK firms with turnover above £1m, also showed that 13% now expect weaker prospects, up from just 1% last month.

However the latest GfK Consumer Confidence Index has revealed different sentiments among the public after it increased by two points in May to minus five, despite inflation dealing a blow to household spending.

Lloyds' survey showed industrial companies were the most gloomy, with sentiment plunging to a net balance of 6% from 56% in April.

These concerns look set to hit recruitment, with a net balance of 19% of firms expecting to expand their workforces over the coming year, down from 37% in April.

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But the survey showed optimism over the wider economy remains fairly robust, with a net balance of 28% down only moderately on the 34% recorded last month and remaining above the long-term average.

This comes despite official figures showing growth nearly stalled at 0.2% in the first quarter.

Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: 'Although we have seen a drop in overall business confidence from last month's elevated level, it is only slightly below the long-term average.

'The June survey will provide a more complete picture for the quarter, but the results from our survey so far still point to a pick-up in growth after the 0.2% out-turn in the first quarter.'