In the CBI’s quarterly industrial trends survey, optimism was found to have fallen for the second survey in succession. Thirty-nine per cent of companies questioned were less optimistic than they were four months ago, while 19% felt better about their prospects.
The report – which polled nearly 900 businesses – highlights declining export sales as partly responsible for the drop in confidence. Exports orders fell by the largest amount since last July and at a greater rate than expected. The situation, however, is now expected to remain stable.
Today’s survey will add more pressure on chancellor Gordon Brown to take measures to curb the strength of the pound to boost the export market.
But following an inflation warning from the Bank of England last week, monetary policy looks likely to be tightened before the end of the year. Analysts believe this will include a rise in interest rates adding to the plight of British exporters.
Speaking last week, the Bank’s deputy governor, Mervyn King, disappointed business with his remarks on interest rates.
‘I think you would find it difficult,’ he said, ‘given this outlook for inflation, to think that the immediate outlook is one of cutting interest rates.’
CBI Associate director of Economic Analysis said: ‘Confidence among smaller companies has taken a further knock with falling orders at home and in overseas markets.’
‘At the very least companies will be looking for a period of interest rate stability to continue,’ he added.
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