A dramatic fall in the usually buoyant service sector’s confidence last month triggered the base rate cut, according to the latest Lloyds TSB Corporate Markets Business Barometer, and further cuts appear inevitable.
The service sector showed a sharp drop in confidence, with optimism levels falling 19% month on month. Service firms expecting business activity to increase over the next 12 months fell from 77% to 60% and businesses expecting a decline in their business rose from 3% to 5%.
Lloyds TSB questioned 200 companies, with the high in July of this year when 58% of companies were optimistic about the economy. Since then the percentage has fallen each month, ending with only 44% of companies being optimistic by November this year.
Trevor Williams, chief economist at Lloyds TSB Corporate Markets, said: “The decline in service sector confidence was undoubtedly one of the triggers for Thursday’s base rate cut. On its own, however, one rate cut will not be enough to halt the slowdown.
“This should be the first in a series of cuts to mitigate the coming economic slowdown but with the MPC still mindful of inflation these cuts may not come as quickly as firms want so we’re not out of the woods yet.”
Regionally, in the south service sector confidence has fallen to its lowest level since just after the London bombings, where just 33% expected business activity to improve in November against 57% the month before.
© Crimson Business Ltd. 2007
