Euro crisis hits business confidence

The Lloyds Bank Wholesale Banking and Markets Business Barometer fell to minus 21 per cent from 26 per cent last month, meaning most respondents are negative on the view of the economy.

The eurozone crisis escalated in May as fears grew over the Spanish economy and the possibility of Greece exiting the euro.

Trevor Williams, chief economist at Lloyds Bank Wholesale Banking & Markets, said: “The renewed concern around the eurozone is clearly having an impact on businesses’ sentiment towards prospects for the UK economy and, to a lesser extent, to their own prospects.”

Companies also became less confident about their prospects, although the decline was not as severe as the sentiment towards the broader economic outlook.

Businesses’ confidence in relation to their own prospects currently stands at 35 per cent, down eight points on April’s 43 per cent, Lloyds said, which still remains higher than during the worst of the financial crisis in 2008/09.

The survey suggests an underlying 0.2 per cent growth in gross domestic product between April and June, Lloyds said, but only once the impact of the Diamond Jubilee is taken into account, which is likely to have reduced growth by 0.5 per cent. The most notable declines in confidence in May were in the North and Midlands.

EU banking move: Page 10.