Domestic demand ‘still sluggish’

Economic prospects remain “fragile” as firms still lack the confidence to invest for growth, according to new research.

A survey of 1,800 companies by Lloyds TSB Commercial found a continued lack of domestic demand, leaving the outlook for profits “weak”.

Business confidence has improved, but the economic recovery was said to be “sluggish”, with profitability still a big concern.

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One in five businesses expected to increase investment over the coming six months, while a similar number planned cuts.

John Maltby, managing director of Lloyds TSB Commercial, said: “With domestic demand in the doldrums, and confidence still muted, it is understandable that firms are worried about investing for the future.

“The fact is that if businesses do not invest, it could damage an already fragile recovery, and result in even slower growth.”

London was the most confident business region, although firms in Wales reported a “dramatic turnaround” in recent months, while the North East and North West were the least confident regions.

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Companies in the hospitality and leisure, business services and manufacturing showed strong levels of confidence, with a less positive outlook reported in healthcare.

Trevor Williams, chief economist at Lloyds Bank Corporate Markets, said: “The pace of economic recovery is still sluggish but...we believe the recovery will continue in the second half.”