By Claire West

Concerns over the economic impact of sovereign debt problems dented business confidence in May, according to the latest Lloyds TSB Corporate Markets Business Barometer.

The survey - a monthly snapshot of company views on the economy and their own business prospects - shows that confidence levels slipped again last month, having fallen from a two-year high in April. 43% of firms expect an upturn in business over the next 12 months, while 12% believe trading will slow.

Businesses faith in the economy was also weakened. While 60% of businesses are more hopeful about economic prospects than they were three months ago, a quarter said their optimism is dwindling.

Across the business sectors, only services firms are feeling more positive overall about their prospects for the year ahead. A balance of 38% of these companies expect business to gather pace over the coming year — an increase of just one point since the last survey. Distribution and
industrial firms were less optimistic.

Firms in the South were more positive about business prospects than those in the North, while the Midlands saw a sharp fall of 40 points.

Trevor Williams, chief economist, Lloyds TSB Corporate Markets, said: “Business optimism feeds off the success of the wider economy. Over the past few months, confidence levels have started to start claw their way back to normality. But with economic conditions still volatile, businesses are bound to be sensitive to events around the world.

'A dip in confidence is never good news. However, these monthly readings are simply checking the current pulse of UK businesses. As for long term health prospects, the Barometer reinforces our view that we are on the road to recovery, albeit a slow one'.

Join us on