In June the balance of companies expecting their level of business activity to increase rather than decrease in the next year crashed to 45 per cent, from 61 per cent in May. The decline of 16 per cent also represents the largest monthly fall since January 2005.

In complete contrast, business confidence in the UK economy improved dramatically in June – the balance of firms feeling optimistic rather than pessimistic about the wider economy rose from 20 per cent in May to 29 per cent in June. Trevor Williams, chief economist at Lloyds TSB Corporate Markets, said: “Despite firms' apparent upturn in confidence in the strength of the UK economy, it is obvious that they are increasingly apprehensive about the future. “Sentiment seems to be that the combination of higher interest rates, a stronger pound and a reacceleration of input costs will squeeze profit margins.”