Firms across the South-East experienced a dramatic downturn in sales, orders and profits in the last six months.

Thirty-one per cent of firms reported falling sales and 34 per cent saw order books shrink - a decline far worse than the UK average.

This had a knock-on effect on confidence, according to a Business in Britain report from Lloyds TSB Commercial More firms were forced to slash prices than were able to raise them, which meant profitability was severely hit in the region. This was echoed in London and the Thames Valley but not in the North.

Only 28 per cent of businesses reported a growth in orders, compared with 45 per cent six months ago, while 34 per cent saw orders fall.

Price pressures were strong and only 16 per cent of firms were able to raise prices compared with 19 per cent forced to reduce them.

Encouragingly, almost two- thirds of firms were expecting to be able to hold prices constant over the first six months of this year.

Thirty-five per cent of companies reported their profits plummeting, resulting in sharp cutbacks in investment and employment with further cuts predicted over the next six months.

Confidence fell dramatically and optimism about orders, profitability and sales was only fractionally above the UK average.

Area director Richard Iwinski said: "This survey clearly indicates the deterioration over the last six months of the environment in which South-East firms are striving to perform.

"Companies have borne the brunt of intense competition at home and abroad, as well as the global slowdown.

"But firms are showing all the signs of battening down the hatches so they can weather the storm ahead."