Businesses plan to cut back on capital investment in response to growing concerns about the economic outlook, according to a new report. The latest Institute of Chartered Accountants in England and Wales (ICAEW)/Grant Thornton UK Business Confidence Monitor also predicts that the UK economy will technically be in recession in the first quarter of 2012. The study shows a big fall in confidence among firms in Q1 2012 against the same period in 2011; the business confidence index fell from +8.1 to -9.3. However, this does represent a slight improvement on Q4 2011 (-9.7). The report also finds that firms are reining in their plans for capital investment and job creation plans are subdued, although small and medium companies are moire likely than larger ones to take on new staff in the next 12 months. Meanwhile, salary expectations for 2012 are depressed, with businesses predicting modest rises of 2%. And despite the impending Olympics, London has seen the biggest dip in confidence over the past 12 months, the report says. Michael Izza, chief executive of ICAEW, said: “This survey shows that businesses are responding to concerns about the economic outlook by cutting back on investment in equipment and people. This is at a time when Government desperately needs businesses to be growing. At the moment, it is hard to see where this growth will come from and the Chancellor needs to use the forthcoming budget to give businesses reasons to be more confident about the future – and unlock potential investments.” On the prospect of recession, the survey says: “The Business Confidence Index has been a close predictor of GDP growth in the eight years of its existence. Recent GDP figures show a contraction of -0.2% for Q4 2011 and, using the Index, another contraction of -0.2% is predicted for Q1 2012, suggesting that the UK economy is again in recession. “The levelling out of confidence in this quarter does however indicate that this second recession will not be as deep.”