U.K. Business Confidence Drops to 3-Year Low, Signaling Slump, Lloyds Says
U.K. business confidence in the economic outlook plunged last month to its lowest level in three years, according to Lloyds Bank Corporate Markets, which said there was a 74 percent chance of a recession.
An index (LTSBBCNX) of British companies’ optimism about the economy compared with three months earlier dropped by 3 points from November to minus 23, the unit of Lloyds Banking Group Plc said in an e-mailed report released in London today. December’s reading was the lowest since January 2009.
“The results indicate that the economy will almost certainly begin the new year with a contraction,” Lloyds economists Hann-Ju Ho and Jonathan Thomas wrote in the report. “As this indicator leads quarterly gross domestic product (UKGRABIQ) growth by three to four months, it suggests that economic activity will progressively weaken during the first quarter and the start of the second quarter of 2012.”
While GDP expanded 0.6 percent in the third quarter, U.K. services output fell the most in six months in October, indicating the economic rebound lost momentum at the start of the fourth quarter. The Bank of England, which restarted bond purchases on Oct. 6 to support the recovery, forecast stagnation in the last three months of 2011 as Europe’s debt crisis dented confidence and curbed demand.
A measure of perceptions among companies about their trading prospects over the next 12 months plunged 14 points to 17 in December, the Lloyds unit said.
Recession Risk
The declines in the two gauges suggest U.K. GDP shrank 0.1 percent in the fourth quarter of 2011, with the contraction accelerating to 0.4 percent in the first three months of 2012, Ho and Thomas said. The probability of recession rose to 74 percent last month, compared with 44 percent in November and 25 percent the previous month, the economists said.
The Lloyds unit questioned 304 companies, all with sales of more than 1 million pounds ($1.55 million), between Nov. 28 and Dec. 15 for the report.
A separate index of new jobs published today by Reed.co.uk, Britain’s largest recruitment website, fell to 121 in December from 133 the previous month. Reed’s gauge of salaries gained 1 point to 99.
A quarterly survey of chief financial officers found that a break-up of the euro area poses the biggest single threat to U.K. companies in 2012. The CFOs see a 37 percent chance of at least one country quitting the single currency this year, according to Deloitte LLP.
The 94 CFOs, who were questioned between Dec. 7 and Dec. 19 for the study, see a 54 percent chance the U.K. will slip back into recession, Deloitte said in an e-mailed statement today.
To contact the reporter on this story: Scott Hamilton in London at shamilton8@bloomberg.net
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net
Rate this Page