Firms 'feel worst' for 16 years

The report's authors warned higher interest rates could stall the economy

UK business confidence has fallen to its lowest level since 1992 in June, according to BDO Stoy Hayward.

Its Business Trends Report showed confidence about the next three months fell to 97.7 in June from 98.3 in May.

It is the lowest figure since Black Wednesday, when the pound was removed from the Exchange Rate Mechanism.

The report comes as consumer confidence levels were seen to be near record lows, buffered by falling house prices, a slowing economy and a credit crunch.

BDO said that the low business confidence figures would suggest that companies were expecting annualised economic growth of 1.3% in the next three months.

That would be less than the chancellor's forecast of between 1.75% and 2.25% for 2008.

"UK businesses are struggling to see any light at the end of the tunnel," said Peter Hemington from BDO Stoy Hayward.

"An interest rate rise next week aimed at curbing inflation could be crippling for business and could worsen the effects of the economic slowdown," he warned.