A new survey from the British Chambers of Commerce (BCC) reveals that business confidence declined significantly in Q3 compared to Q2 of this year.
Of the 5,200 firms that took part in the BCC's quarterly economic survey, nearly four in ten (39%) businesses believe they will see a fall in profits over the next 12 months.
Inflationary pressures are affecting business confidence, with soaring interest rates also cited as a growing concern for businesses.
Only 44% of businesses expect their turnover to increase over the next year, down from 54% in the last quarter.
Fewer businesses reported increased sales compared to Q2, with only 33% of firms reporting an increase in domestic sales in the last three months.
The retail and wholesale sector took a particularly large hit to sales, with more firms reporting a decrease (39%) than an increase (25%).
More businesses are experiencing cash flow problems, with 32% of firms reporting reduced cash flow compared to 23%reporting an increase.
David Bharier, head of research at the BCC, said:
"This quarter's results point to a significant decline in business confidence, with a clear shift downwards in many of the key indicators we track.
"Businesses now desperately need to see economic stability in order to rebuild the confidence to invest."
Responding to the findings of the economic survey, director general of the BCC, Shevaun Haviland, said:
“Our findings paint a worrying picture of the state of affairs at many UK firms. Almost every key business indicator is trending downwards – sounding alarm bells across all sectors and regions.
“Sales and cash flow are down, firms are operating below capacity, and the number of businesses expecting to see their profits increase is falling.
The BCC continued to urge the Government to bring forward any fiscal plans to help businesses and markets to understand how they may be able to find stability over the coming months.
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