Britain's Struggling Economy facing a New Threat

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Briatin's struggling economy is facing a fresh threat from a collapse in business confidence, according to three separate surveys.

Finance directors believe there is a one-in-two chance of the double-dip recession lasting until the end of the year and four-fifths believe it would be better to delay investment plans due to the current uncertain environment, according to Deloitte’s CFO survey. Confidence among the group in the second quarter dropped to a five-year low.

Deloitte’s findings were matched by BDO, which found that business confidence had plummeted to its lowest level this year. A separate report on activity levels from Lloyds TSB found that growth had slowed to the weakest reading in seven months.

The findings will further dent hopes that businesses will drive the recovery by investing the £750bn of cash they have hoarded to see them through a crisis.

As well as the double-dip, finance directors blamed the eurozone for the drop in confidence. They said the probability of one or more countries leaving the euro by the end of the year was 36pc, the highest level so far recorded. Some 28pc said their contingency plans had been put in place or were at an advanced stage.

Ian Stewart, Deloitte chief economist, said: “The survey underscores the connection between the macroeconomic environment and corporate behaviour, in an indication of the challenge in getting corporates to invest their cash reserves and drive UK economic growth.

“Some 95pc of finance directors rate the current financial and economic uncertainties facing their business as being above normal.

“Uncertainty has had a corrosive effect on risk appetite and 80pc of CFOs say this is not a good time to take risk on to their balance sheets.”

According to BDO’s business trends report for June, optimism has collapsed to its weakest level this year, “indicating a bleak second half of 2012 for the economy”. It also warned that the short-term economic outlook took a knock, with the forecast for business conditions in one quarter’s time posting its biggest drop for 12 months.

Lloyds TSB’s June regional purchasing managers’ index found that the regions reported their slowest overall activity since November 2011.

At 51.3, it indicated a marginal rise in activity but a slower rate of output growth than in May.

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