The Confederation of British Industry has recorded the biggest fall in business confidence in over two years, according to its quarterly survey of small to medium-sized manufacturers.

The number of businesses that felt “more optimistic” about the future fell in April to minus 30 from January’s level of plus seven. The sag was matched by manufacturing output, which fell at its fastest rate since October 1999, said the CBI, although the gloom was more evident among smaller businesses than medium-size firms.

Said senior CBI official, Simon Bartley: “Last week's quarter point cut in interest rates was timely, but it remains to be seen whether or not it makes SMEs [small and medium enterprises] more confident about investing in the future.”

Bartley opined that consequential belt-tightening among companies could make it harder for them to compete in the longer term. “The main problems with the interest rate cut," he said, "are a lag in its effectiveness, and the fact that it was discounted by many market players ahead of time.”

Manufacturers also reported that a fall both in prices and unit costs had created a squeeze on profit margins.

News source: BBC Online Business News (UK)