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By Kara Gammell
The research by BDO, the accountants and business advisers, said long-term economic prospects are not showing signs of improvement.
BDO's Optimism Index – which reflects how UK businesses expect trading to develop in the medium term – tumbling to 93.1 in August from 95.5 in July.
These levels have not been seen since the deepest parts of the recession, between November 2008 and July 2009. It is also the first time the index has dropped below the crucial 95 mark since July 2009, suggesting that the economy may contract at the end of this year.
The company's output Index, which tracks UK businesses' turnover expectations, also shows a marked drop from 99.8 in July to 97.8. This data points to sluggish economic growth in the second half of the year.
The lack of confidence may coincide with government communications around forthcoming fiscal tightening, combined with the looming Comprehensive Spending Review that will set out the government's spending plans from 2011 to 2015.
Peter Hemington, partner at the firm, said: "If the end of 2010 does indeed turn out to be the st