U.K. Business-Confidence Index Falls to Lowest in Two Years

U.K. business confidence declined in March to the lowest in two years, suggesting the economy may struggle to gather strength in the second quarter.

A gauge of sentiment, which aims to predict economic developments four months in advance, fell to 1 from 3 in February, London-based Lloyds Banking Group Plc (LLOY) said in an e- mailed statement today. The share of companies that were less optimistic about economic prospects increased to 44 percent from 36 percent in the previous month.

Surging oil prices are threatening to undermine company earnings while leaving households with less money to spend as government austerity measures hurt domestic spending. Britvic Plc (BVIC), the maker of Robinson’s fruit drinks, said on Feb. 24 that costs are rising at an “unprecedented” pace and operating margins won’t improve this year.

The index “seems to be consistent with flat quarterly growth in the second quarter,” Lloyds said in the report. It estimated last month that the economy may grow 0.7 percent in the current quarter, citing a “weather-related bounce” after the fourth-quarter contraction.

The share of companies that were optimistic about the economic prospects rose to 45 percent from 39 percent, the report showed. Among manufacturers, a gauge of confidence fell to 19 percent in March from 24 in the previous month, while sliding to 10 from 12 among services companies. An indicator of sentiment among retailers fell to 4 from 12.

To contact the reporter on this story: Fergal O’Brien in London at fobrien@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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