This, coupled with slower manufacturing growth, has reined in companies' expectations for the year. The latest Business Barometer from Lloyds TSB Markets, found that fewer firms expect higher business activity in the next 12 months. The barometer's balance - the percentage of firms expecting higher activity in the next 12 months minus the percentage of firms with lower expectations - fell by 10 points from 66 per cent in February to 56 per cent in March.

Despite that decline, predictions for the UK economy remained strong – the majority of businesses said they were optimistic. “This looks like it will be just a blip rather than a sustained trough in confidence because underlying UK economic conditions remain strong,” said Trevor Williams, chief economist at Lloyds TSB Corporate Markets. Williams warned that the recent changes in the Budget were also likely to affect business confidence. “While the 2 per cent cut in corporate tax is welcome, it was offset by cuts in capital allowances leaving firms to foot an additional bill of £1.2bn by 2009-10,” he said.