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Aug. 30 (Bloomberg) -- U.K. business confidence in the economic outlook plunged this month to its lowest level since the depths of the recession in 2009, Lloyds Bank Corporate Markets said.
An index of British companies’ optimism about the economy compared with three months earlier dropped to minus 3 from 19 in July, when the gauge declined 17 points, the unit of Lloyds Banking Group Plc said in an e-mailed report released in London today. August’s reading is the lowest since March 2009.
“The sharp fall reflects a variety of factors, including concerns about slowing global growth, the U.S. ratings downgrade and the inability of policy makers to fix the euro-area sovereign-debt crisis,” Lloyds Bank Corporate Markets economists Hann-Ju Ho and Jonathan Thomas wrote. “Prospects for the economy in the second half of the year look to be somewhat weaker than previously anticipated.”
The U.K. economy has barely expanded since September as government budget cuts and accelerating inflation sap consumer confidence. Growth was just 0.2 percent in the second quarter and a Confederation of British Industry report today showed business volumes at services companies in the three months through August fell at their fastest pace since November 2009.
The declines in the Lloyds Business Barometer in July and August suggest U.K. gross domestic product will expand 0.3 percent this quarter, before expansion slows to 0.1 percent in the final three months of 2011, Ho and Thomas said. The Lloyds unit questioned 308 companies, all with sales of more than 1 million pounds ($1.6 million), between Aug. 1 and Aug. 17.
In its report, the CBI said an index of sales volumes at business-services companies such as accountants slumped to minus 22 in the three months through August from 5 in the quarter through May. A measure of sales at consumer-services companies including restaurants and bars slipped 2 points to minus 25. Both gauges were at their lowest since November 2009.
The CBI, the U.K.’s largest business lobby, questioned 162 companies between July 29 and Aug. 17 for the report.
A separate release from the Engineering Employers Federation showed fewer U.K. manufacturers saying their borrowing costs rise in August. A survey of 277 producers between Aug. 3 and Aug. 23 found the percentage seeing a “moderate or significant” increase in the overall cost of credit dropped to 17 percent from 25 percent in the second quarter.
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