BUSINESS confidence has slipped, according to the latest Lloyds TSB Business Barometer.

The survey – a snapshot of businesses’ views on their own performance and wider economic prospects – showed fears over European debt continued to dampen confidence in the wider economy, while firms remained relatively upbeat about their own prospects.

They were far less optimistic about the economic outlook than in the previous month, largely as a result of continuing worries over the debt crisis.

The number of firms saying they were more optimistic now than three months ago slipped 13 points to 47 per cent, while the percentage that are more pessimistic edged up three points to 27 per cent.

Forty-two per cent said they expected an increase in business over the next 12 months, while seven per cent said they expected a slowdown.

Services and distribution firms were more optimistic about their own business prospects, but confidence among manufacturing firms slipped five points to 18 per cent - in marked contrast to the findings of the latest PMI manufacturing survey.

Trevor Williams, chief economist Lloyds TSB Corporate Markets, said: “Worries about the European sovereign debt crisis are clearly still weighing on the minds of businesses, and we’re seeing confidence in the broader economy dip as a result.

“But, so far, companies remain upbeat about their own business prospects.

“The next few months will be critical - there is a chance we may see one or two quarterly periods of negative growth.

“However, based on these figures, a sustained fall in GDP remains extremely unlikely.”