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Three-year low in businesses expecting trading upturn in coming year

Published 31/05/2016

Sentiment among firms in the consumer services sector fell by 14 points
Sentiment among firms in the consumer services sector fell by 14 points

The number of firms that expect trading to pick up over the coming year has fallen to its lowest level in three years, according to a report.

The Lloyds Bank Business Barometer in May said the balance of companies who thought business would improve over the next 12 months fell by 11 points to 38%, its lowest level since 2013.

It added sentiment among firms in the consumer services sector fell by 14 points to 19%, also the lowest level for more than three years.

But the report said industrial sector sentiment lifted by 16 points to 61%, the highest level since last spring.

Overall, the survey said UK business confidence fell by 6 points to 32% in May, adding to a growing sense that the UK economy is slowing down.

Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: "Our May survey shows a second consecutive monthly fall in overall sentiment, suggesting that economic growth may slow further in the second quarter due to near-term economic risks."

Data from the Office for National Statistics last week confirmed that gross domestic product growth for the first quarter of the year came in at 0.4% following a slump in industrial production, down from 0.6% in the fourth quarter of last year.

Chris Williamson, chief economist at Markit, warned that growth in the second quarter could show the British economy ''slowing to near-stagnation'', weakened by easing global economic growth.

The ONS data showed that the dominant service sector grew 0.6%, but industrial output fell 0.4% and construction dropped 1%. Manufacturing also declined by 0.4%.

Economists have warned that if sluggish growth continues, the Bank of England could be forced to consider a cut to interest rates.

Howard Archer, chief UK and European economist at IHS Global Insight, said: " We believe there is a growing risk that the economy may not bounce back that well after a vote to stay in the European Union, as there is the danger that caution among businesses and consumers could persist following a likely very weak second quarter."

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