By Max Clarke

Nearly a third of smaller British businesses trading internationally have said that the UK economic situation has worsened over the last six months, to the detriment of their business.

Deteriorating conditions in the Eurozone, along with tightening austerity measures and persistent inflation, have impacted confidence in future trading conditions, and there was a 12% drop in the number of businesses confident that trade conditions will improve over the next 12 months.

This is according to the latest monthly Travelex Confidence Index (TCI), which charts the performance of smaller businesses trading internationally.

“The fall in trade confidence, evident from June’s index, has been largely impacted by rising UK inflation and the debt crisis we are witnessing in Europe; the UK’s main trading partner,” said Travelex’ Global MD David Sear.

“UK small to mid-sized enterprise are already finding it difficult to trade profitably with Europe, due to a continuous pressure on margins and bottom line, and are now anticipating further struggles. With the threat of default and collapse across the channel, it is no wonder that importers’ and exporters’ expectations over the next six to 12 months have dropped this month.

The negative effect of the Eurozone’s troubles on UK businesses have been added to by numerous rising indexes of inflation, notably output price or ‘factory gate’ inflation, which has risen by 13%, negatively affecting the price competitiveness of UK manufactured goods.

Continued Sear: “UK inflation has been above the 2% target since December 2009 and is working against an export-led recovery as it is negatively impacting exporters’ competitiveness abroad.”

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