Business confidence at two-year low

Confidence about the economy among Britain's companies has fallen to a two-year low but they are much happier over their own individual situations, according to new research.

The number of firms saying they were optimistic over economic prospects fell to 34% in October compared to 40% a month ago, while 49% said they more gloomy compared to 33% in September, the survey from Lloyds Bank said.

Industrial businesses reported the largest decline in confidence, with much lower falls for retail and services.

A sharp fall in the North and the Midlands, where most of the UK manufacturing base is situated, reflected this trend.

But the rating for firm's own prospects improved, with 91% anticipating an increase or the same level of trading over the next year.

Trevor Williams, chief economist at Lloyds Bank Corporate Markets said: "The fall in confidence is justified by the weakening in the global activity seen recently and also the heightened concerns regarding the eurozone debt crisis."

That suggests the economy could weaken in the final quarter, he added.

Meanwhile, in another gloomy survey the Ernst & Young ITEM club said the slowing of the UK's economy could also have far reaching effects on the financial services sector.

It forecasts loan write-downs by the banks will rise by £3 billion as companies and households struggle, while pressure on bank lending will also slow any UK recovery.

Neil Blake, senior economic adviser to ITEM, said: "The government has set out to de-risk the sector and make the UK less reliant on it in order to make the economy more secure. Unfortunately if no other sectors step into the resulting gap, prosperity will go down across the country."