British companies are pessimistic about prospects for their business in the next year despite showing optimism in the UK economy, according to Lloyds TSB.
The bank's monthly business barometer showed a collapse in confidence, with the percentage of companies expecting their activities to improve in the next year falling from 61 per cent in May to 45 per cent in June.
By contrast the balance of businesses upbeat about the UK economy rose from 20 per cent to 29 per cent.
Lloyds TSB Corporate Markets' chief economist Trevor Williams said that, notwithstanding the survey's apparently paradoxical findings, an overall trend could be established.
"Despite firms' apparent upturn in confidence in the strength of the UK economy, it is obvious that they are increasingly apprehensive about the future," he explained.
"Sentiment seems to be that the combination of higher interest rates, a stronger pound and a reacceleration of input costs will squeeze profit margins."
The service sector saw the worst fall in improved expectations, down from 76 per cent to 39 per cent one month later.
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