Business confidence sees biggest drop since 1995, research reveals

Business confidence in the UK has seen its biggest drop since 1995 following talk of spending cuts.

The Business Trends survey by accountancy firm BDO fell to 97 in May from 103.3 the previous month, which is the largest drop since the survey began.

BDO said economic growth forecasts for this year and 2011 would need to be revised down sharply, the BBC has reported.

BDO’s survey is compiled by the Centre for Economics and Business Research and covers 11,000 companies from a range of industries.

Peter Hemington, a partner at BDO, said: “The government has understandably been keen to emphasise the extent of the sacrifices that we will all need to make as public borrowing it brought under control. But there is a significant risk the rhetoric has begun to impact on business confidence, and fears of the economic impact of spending cuts may be causing businesses to rein back on growth plans.”

The accountancy firm forecast that economic growth will remain below an annualised 1% in the final three months of this year.

Government forecasts for growth in 2011 should now be between 1.5% and 2.5%, the firm said, well below the 3% to 3.5% the previous government estimated.

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