Economic growth prospects remain positive, despite a drop in confidence among businesses, according to the Lloyds TSB business barometer.
According to the survey, business optimism fell in December, after experiencing a strong uplift in November.
However, overall confidence levels remain far higher than a year ago and are above the survey average.
Just over half of businesses (52%) say they are more upbeat than they were three months ago and a fifth (19%) reported they were more upbeat than three months ago. A fifth claimed to be more pessimistic, resulting in an overall balance of 33%.
By comparison two thirds (67%) were more optimistic in November, and 16% were more downbeat, representing a balance of 51%.
Despite December's fall, the overall balance of firms expecting economic conditions to improve remained at a much higher level than at the end of 2008 and is far above the survey average of 7%.
Sector and regional differences were also apparent as the balance of distribution firms reporting rising levels of optimism rose 10% to 38%, while the balance of service businesses fell 13% to 50%.
Industrial firms suffered the deepest slump, falling a massive 55% to zero, in spite of the more favorable exchange rate for exporters. However, pan sector the levels of optimism were much stronger than 12 months ago.
Similar differences were apparent across the regions. The South remained the most optimistic with firms reporting an overall 1% slip, while in the North and Midlands experienced falls of 35% and 26%. Again overall optimism remains much higher across the regions than at this time last year.
Trevor Williams, chief economist at Lloyds TSB Corporate Markets, says: "Although confidence levels fell back at the end of the year, the context here is critical.
"Across the board, businesses are now far more optimistic about the economic outlook that than they were twelve months earlier."
The survey, which started in January 2002, represents over 200 companies with turnover above the £1m mark.
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