Business confidence takes a tumble

The confidence of UK businesses has dropped for the first time in more than a year, the latest findings from a quarterly business monitor reveals.

According to the report from the Institute of Chartered Accountants in England & Wales (ICAEW), firms' optimism about the future dipped to plus 6.2 on the institute's index, the first fall in five quarters.

ICAEW said following the recent hike in interest rates to 5%, the survey is one of the first indicators that the UK economy may be about to slow down.

Small firms showed the least confidence. The index for firms employing less than 10 employees tumbled to its lowest level recorded since the survey began three years ago, while confidence in micro businesses, historically the most buoyant of business sizes, plummeted to 0.0, from plus 12.9 three months ago.

Conversely, confidence in medium sized businesses rose to plus 11.0 from plus 9.7, making this business size the most confident for the first time in three years.

ICAEW chief executive Eric Anstee said: "Our Business Confidence Monitor suggests that the strong growth in 2006 fuelled, in part, by rising house prices, cannot last and that economic growth will slow next year.

"The survey shows the economy changing gear – away from consumer and government spending towards business spending, giving hope that a hard landing for the economy in 2007 may be avoided."