'Sharp fall' in business confidence, says CBI

 
Land Rover assembly line Land Rover recently created 1,000 jobs at its Solihull factory, but many businesses are less confident

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Firms are reviewing investment plans after a "sharp fall" in confidence among senior business leaders, according to research by the CBI.

The CBI interviewed 122 business people and found 70% were less optimistic about the future than in August.

Two out of five were freezing recruitment or laying off staff.

The Treasury said the government deficit reduction plan had "placed the UK ahead of the curve and helped to protect businesses".

However, shadow business secretary Chuka Umunna said the findings were "deeply concerning".

CBI director general John Cridland, speaking on the eve of the organisation's conference, said it had been a year of "disappointed expectations", with the eurozone crisis adding to the problems of British businesses.

While Mr Cridland supported the coalition government's determination to cut the deficit, he urged the Chancellor George Osborne to unveil a "Plan A Plus" in his autumn statement later this month.

"We're at a critical tipping point, with the eurozone crisis reaching a crescendo and UK growth forecasts being revised down," said Mr Cridland.

"The chancellor needs to use his autumn statement to boost business confidence with game-changing new ideas," he added.

The CBI leader said the government should bring forward certain infrastructure projects, which would "leverage" billions of pounds of private sector investment.

'Heavy lifting'

"The chancellor has to announce plans for growth and the government needs to do more of the heavy lifting which is needed. There is no support for additional public spending because we think that would reduce growth rather than enhance it," he added.

Businesses gave their reasons for pessimism as the eurozone crisis, weak consumer demand, slow growth and instability in the financial markets.

But four out of five business leaders supported the government's deficit reduction plans.

Ian McCafferty, the CBI's chief economic adviser, said uncertainty about the eurozone and other factors had affected confidence and he added: "Firms are holding off taking on new staff."

A Treasury spokesman said: "The government is using every lever at its disposal to protect the UK economy and make sure that it remains a relative safe haven in the face of international instability and uncertainty in the euro zone.

"We are also tackling structural issues that will create the right conditions in the long term needed for strong and sustainable growth.

"Underpinning this is the government's deficit reduction plan, which has placed the UK ahead of the curve and helped to protect businesses and families by keeping interest rates low.

Other countries have not taken these difficult decisions and are now feeling the effect of weakened market confidence," he added.

Mr Umunna said: "Labour's five point plan for jobs and growth would get the economy moving again and boost business confidence now by bringing forward infrastructure projects, temporarily reversing the government's VAT hike to help spur the retail sector and providing a tax break for small firms taking on extra workers."

 

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  • rate this
    +2

    Comment number 79.

    It's all about confidence which has clearly plummeted in only 2 months. And in that time what progress has been made in the eurozone? none! I would borrow 100k today at 10% for my small business if I could be sure of continued growth. But I can't. the future becomes less certain with every days euro squabble.

  • rate this
    +31

    Comment number 39.

    Eventually they'll make the connection - outsourcing jobs means less employed people, means less people with money to spend, means less sales, means less profit. If no one has a job, how can they buy their service or product?

  • rate this
    +11

    Comment number 29.

    Well it's hardly a surprise is it! Even those of us without economics degrees could have predicted this. As a public sector worker facing redundancy and having just had a paycut and 3 year pay freeze my spending has been reduced to almost nothing except for essentials. And this will continue until there is some public sector stability. Where are all the new private sector jobs then Mr Chancellor?

  • rate this
    +8

    Comment number 15.

    My business is doing fairly well, but it's been tough. We've been supported by the bank through all the mess but they've made us pay through the nose for it and jump through hoops too. Our main cause for concern at the moment is the lack of EU governments collective will to sort out their mess. I still think the cuts are right but it's not going to be an easy few years!

  • rate this
    +2

    Comment number 12.

    "The Treasury said the government deficit reduction plan had placed the UK ahead of the curve and helped to protect businesses."
    It patently has not and what does not help is government vascillating on what needs to be done.
    Using money bailing out the banks was a big mistake and should have been used to kickstart consumer spending.
    Whatever the government does now will be too little too late.

 

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