Confidence among UK firms lowest since 2006

British firms have been hit by a marked drop in confidence regarding the state of the economy in the past month, with optimism at its lowest level since last year, according to a new report.

But despite the increased pessimism about the state of the UK economy, few companies expect their own business to suffer in the coming year, said Lloyds TSB.

A survey 200 firms showed that the number expressing optimism about the general economy fell from 55% in April to 46% last month.

Trevor Williams, chief economist at Lloyds TSB Corporate Markets, said: "Firms are clearly feeling jittery about the chance of interest rates rising above 6% and the resulting downward pressure on their profits.

"Encouragingly though, this slump in optimism has not translated to a corresponding fall in business confidence, perhaps helped by a loosening of the labour market and subsequent slowdown in wage growth, which will help to offset any fall in pricing power."