Lloyds TSB says UK businesses to endure tough 2008

January 15, 2008

According to a survey by Lloyds TSB, the financial market turmoil has dented the confidence amongst UK businesses, but not enough to hit plans to raise prices as they prepare to ride out a potentially tough year ahead. Lloyds TSB Commercial's semiannual ‘Business in Britain’ survey showed the balance of companies expecting improved rather than worsening conditions over the next six months falling to 18%, from 41% in July's survey. The changed outlook comes after slower orders, sales and profits during the second half of 2007, with the balance of companies reporting higher rather than lower sales falling to 26% from 41% previously. The balance of higher order book levels also dropped to 19% from 33%.

Although, Lloyds TSB said these declines do not point towards a recession, as companies expect profits to be maintained rather than matching the strong growth seen over the recent past, while there has been a large increase in the number of firms planning to increase prices. Meanwhile, the balance of companies expecting to be able to raise prices reached a 15-year-high of 34%, up from 23% - A worry for the Bank of England as it tries to balance inflationary pressures alongside slowing growth in the economy. This comes as the balance of firms expecting higher order books levels, sales growth, and to recruit more staff, declined but remained positive. Finally, the credit crunch does not seem to have impacted businesses much, with only a small rise in the balance of companies reporting strains on cash flows, at 21% from 19%.