UK firms `more pessimistic about economy`

Companies in the UK have grown more pessimistic about the state of the country`s economy, according to new research.

The Lloyds TSB Corporate Markets Business Barometer for May indicated that confidence in the economy is at its lowest levels since December 2006.

Some 46 per cent of firms said that they felt confident in May, down from 55 per cent in April. Meanwhile, the reported level of pessimism regarding the general economy rose from 14 to 26 per cent.

Trevor Williams, chief economist at Lloyds TSB Corporate Markets, commented: "Firms are clearly feeling jittery about the chance of interest rates rising above six per cent and the resulting downward pressure on their profits.

"Encouragingly, though, this slump in optimism has not translated to a corresponding fall in business confidence."

Consumers, however, seem to be feeling confident about their ability to continue spending; May data from the Office for National Statistics reveals that retail sales in Britain increased 0.4 per cent during the month.