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Business confidence among UK firms jumped significantly in September, despite the turmoil on the world's financial markets, new research has found.

A mammoth 70 per cent of companies questioned by Lloyds TSB Corporate Markets said they expected their business activity to increase over the next 12 months, a rise of 11 per cent on August's figure.

Just seven per cent of British firms said they expected their business activity to slow over the coming year, according to the latest business barometer published by the group.

Confidence about individual business prospects was highest within the industrial sector, with the balance of firms expecting to experience higher, rather than lower, business activity rising to 84 per cent. In August the balance of industrial firms anticipating a rise in business activity was just 38 per cent.

Confidence within the service sector was also higher, with the balance of companies expecting an increase in business activity standing at 81 per cent for September – up from 68 per cent in August.

Lloyds TSB said the results of the survey indicated that the majority of UK firms were likely to report continuing profits growth over the year, despite the global credit crunch that some analysts fear could spread to the wider economy.

However while the poll shows that businesses remain unconcerned about the impact the credit squeeze will have on their individual operations, the financial crisis has hit the confidence they have in the UK's overall economic situation.

The balance of firms feeling more, rather than less, optimistic about the economy fell to 20 per cent in September – a 12 per cent drop on August's figure.

Jitters about the UK's economic situation come amid ongoing turbulence on the financial markets caused by rising default levels in the US sub-prime mortgage market. Banks have become less willing to lend money to one another in the wake of the crisis, amid concerns about the extent to which they are exposed to bad debts in the sector.

Some economists fear the subsequent credit crunch could hit the real economy if banks decide to tighten lending conditions, but the Lloyds TSB survey appears to indicate that UK firms remain confident about their own prospects.

Trevor Williams, chief economist at Lloyds TSB Corporate Markets, said: "While UK firms are clearly concerned about the possible wider implications of the credit market turmoil, such bullish results suggest there is no evidence of any impact on their day to day business activities.

"In fact, business confidence has increased in each of the last three months, at a time when the inter-bank liquidity squeeze and fears over the US sub-prime crisis spreading to the global economy have been most intense," he added.