German confidence falls to new low

The 3i European Barometer Index, the quarterly survey carried out by venture capitalist 3i to gauge sentiment among the firm’s portfolio companies, has found contrasting opinions across Europe.

The overall index has highlighted an increase in business pessimism, which has fallen from -39 to -69. The drop in confidence was most evident in the UK, falling from -7 to -81, although the most notable downturn in confidence occurred in Germany, which fell to a new record low of -105, from -60 in the previous quarter. The index reached its highest level of +81 in June 1998 and its lowest level of -109 in the last quarter of 2001.

On a positive note, business confidence has increased in France during the past three months, although remains negative at -40 compared to the Q2 level of -96. The survey also found that a majority of 3i-backed companies still expect to employ more people by the end of 2002 than they did at the end of 2001. However the net balance expecting an increase is at its lowest since the survey was established in 1998.

The divergent results for France compared with its European neighbours concur with the venture capital investment data for the first quarter of 2002. European venture capital investment in Europe fell by approximately one third in the first three months of 2002, according to a survey from VentureOne and Ernst & Young. However, during the same period, France recorded a 24 per cent increase in investment.

The findings are based on a survey of managing directors from 3i's investee companies. The main confidence measure is derived from their answers to three questions about the favourability of the business and political climate for starting a new business, expanding existing business activity and growing by acquisition.