Small and medium firms report further fall in confidence in UK

Small and medium-sized firms in Britain's battered manufacturing sector reported a further fall in business confidence in July, the Confederation of British Industry has disclosed.

Of those surveyed, 43 per cent were less optimistic about their general business situation and 15 per cent more upbeat. The balance of -28 per cent was slightly better than the -30 per cent in April, the peak of the foot-and-mouth crisis.

Small firms were slightly less confident than their medium-sized counterparts, with 45 per cent predicting grimmer times ahead, according to the confederation.

Britain's manufacturing sector, which accounts for one-fifth of the economy, skidded into recession in the second quarter as a wilting global economy and the strength of sterling continued to bite.

SME (small and medium-sized firms) manufacturers are facing extreme pressure from the global slowdown, according to Mr Simon Bartley, vice-chair of the confederation's SME council.

The manufacturers continue to experience falling orders, whether they are suppliers to larger UK manufacturers or sell directly to US or international companies, he added.

Export optimism amongst small companies continued to wane, slumping to its lowest level since October 1998 in line with the sector as a whole, but medium-sized companies managed to dodge the trend, the CBI said.

Export orders fell at their sharpest rate since July 1999, and small firms expect a further, more modest decline - with medium-sized firms betting on a pick-up.

Output in both sectors crumbled at its fastest rate since October 1999, while investment plans for plant and machinery weakened.

The London Stock Exchange declined to comment yesterday on speculation that it had appointed advisers to pursue a merger with the London International Financial Futures Exchange (Liffe).

Newspaper reports said the LSE had appointed corporate finance specialist Hawkpoint Partners to advise it exclusively on merger talks with Liffe - which, amongst other instruments, trades options in many of the LSE's top shares.

An LSE spokesman said the exchange had a variety of advisers which worked on different projects, but declined to comment on specific projects.

The reports said new LSE chief executive, Ms Clara Furse, was thought to have secured approval to pursue a proposal to merge with the futures market at an LSE board meeting last month. It did not give sources.

Prominent figures in the City of London's financial district may be in favour of a merger as a defensive move against Europe's two largest financial exchanges - Deutsche Borse and Euronext.