Confidence among British firms has plunged to a new low in the wake of the economic downturn, according to a study today.
A survey of more than 200 firms last month by Lloyds TSB showed almost one in four feared their business activity will fall over the next year, with fewer than one in three confident that things will improve.
The balance of 8% was the lowest since the bank launched its business barometer six years ago and represented a huge dip in confidence since August.
More than two thirds of those polled said they were more pessimistic about future trading prospects than three months ago.
Trevor Williams, chief economist at Lloyds TSB Corporate Markets, said: "With business confidence at rock bottom, the crucial question is what will help firms regain faith in their own prospects and in the wider economy?
"One reason for hope is falling interest rates. If it is true that inflation has now peaked, the chances are that the Bank of England will be able to trim rates even further before too long. That would help ease the cost of borrowing for firms and homeowners, which would in turn encourage higher levels of spending.
"In addition, a weaker currency may in time help export firms to become more competitive, though that also depends on growth in overseas markets. It is developments like these that are needed to set the economy back on an upward path."
Service firms were most hopeful of an upturn in future business activity, while companies in the North of the UK were more upbeat than those in other parts.