UK business confidence has slumped to its lowest point this year amid fluctuating economic prospects, according to research by BDO.

The BDO Optimism Index, which predicts business performance two quarters ahead, has hit a seven-month low in the firm's latest Business Trends report. The indicator fell for the fifth consecutive month, from 93.5 in June to 93.1 in July.

BDO says there was a brief resurgence in business confidence in Q1 2012, where confidence reached as high as 98, but the index is now at the lowest level since December 2011. The poor performance is a sign that contraction will continue for the remainder of 2012.

The research suggests the manufacturing sector is bucking the overall trend. Manufacturing confidence levels improved substantially, up from 83.8 in June to 90.5 this month, following a decline of 8.4 points from May to June.

In contrast, service sector confidence declined in July, falling by 2.1 points to 93.8, despite showing consistent increases between February and May.

BDO partner Peter Hemington said: 'This month's figures serve as a stark reminder of the continuing difficulties the UK economy faces, with zigzagging business confidence undermining the improvement in confidence that we saw at the start of 2012.'

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