Corporate sentiment about the UK's economic prospects collapsed in May, the Lloyds Bank Wholesale Banking and Markets Business Barometer showed, tumbling 47 points from a positive reading of 26pc to -21pc – meaning most respondents were pessimistic about the outlook.
The reading will worry the Treasury, which is counting on companies to release for investment some of the £750bn they are hoarding. The drop in confidence, though, will only encourage them to wait.
Although sentiment about the UK in general turned negative, companies were still fairly upbeat about their own trading prospects, with the reading in May falling just eight points to 35pc. Profit margins also improved marginally, with the balance rising two points to -15pc.
Overall, however, the May survey pointed to weak growth of 0.2pc in the second quarter of the year – excluding the effect of the extra day's bank holiday for the Diamond Jubilee, which may have knocked as much as 0.5 percentage points off growth. Sentiment also remained above the levels seen at the end of 2011 and during the height of 2008 financial crisis.
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