BUSINESS confidence took a tumble during July, according to a survey today.

The Lloyds Bank Corporate Markets Business Barometer said UK business confidence fell back after hitting a 13-month high in June.

But it predicted a gradual improvement in economic growth during the second half of the year.

Service sector trading prospects rose to a 19-month high, but the optimism was not matched in the industrial and retail sectors, where sentiment weakened.

Just 46% of all businesses polled were more optimistic about economic prospects – down from 51% in June.

The proportion of businesses that were less optimistic almost doubled to 27% from 15% in June.

Trevor Williams, chief economist for Lloyds Bank Corporate Markets, said confidence had been hit by rising fears that the sovereign debt crisis in Britain’s largest trading area, the eurozone, could spread to countries such as Italy and Spain.

He said: “The Lloyds Corporate Markets Business Barometer points to a very gradual pick-up in growth in the second half of the year, but the recovery remains fragile.

“Domestic demand conditions look set to remain challenging, but external demand and business-to-business activity are likely to fare better”.