The number of firms that expect trading to pick up over the next 12 months has fallen to its lowest level in three years.
The Lloyds Bank Business Barometer has shown the balance of companies who thought business would improve over the coming year has fallen by 11 points to 38 per cent – its weakest reading since 2013.
The report added that sentiment among firms in the consumer services sector fell by 14 points to 19 per cent, also the lowest level for more than three years.
But it said industrial sector sentiment lifted by 16 points to 61 per cent, the highest level since last spring.
Overall, the survey said UK business confidence fell by 6 points to 32 per cent in May, adding to a growing sense that the UK economy is slowing down.
Hann-Ju Ho, senior economist for Lloyds Bank Commercial Banking, said: “Our May survey shows a second consecutive monthly fall in overall sentiment, suggesting that economic growth may slow further in the second quarter due to near-term economic risks.”
Data from the Office for National Statistics (ONS) last week confirmed that gross domestic product growth for the first quarter of the year came in at 0.4 per cent following a slump in industrial production, down from 0.6 per cent in the fourth quarter of last year.
Chris Williamson, chief economist at Markit, warned that growth in the second quarter could show the British economy “slowing to near-stagnation”, weakened by easing global economic growth.
The ONS data showed that the dominant service sector grew 0.6 per cent, but industrial output fell 0.4 per cent and construction dropped 1 per cent.
Economists have warned that if sluggish growth continues, the Bank of England could be forced to consider a cut to interest rates.
Howard Archer, chief UK and European economist at IHS Global Insight, said: “We believe there is a growing risk that the economy may not bounce back that well after a vote to stay in the European Union, as there is the danger that caution among businesses and consumers could persist following a likely very weak second quarter.”