business confidence in Hampshire has slumped as firms await next week’s announcement of the Government’s spending cuts, a survey has revealed.

There have been significant drops in recruitment and investment in training while fears over inflation and exchange rates remain issues of most concern.

Fewer companies are now working at full capacity and the number of firms reporting an increase in orders has fallen from a quarter to a fifth in the past quarter. Those reporting a decrease in UK sales grew from 14 to 24 per cent.

The economic survey by Hampshire Chamber of Commerce, covering July to September, found that only five per cent of respondents expect to increase their workforce in coming months, compared to 19 per cent in the last survey.

And only eight per cent said they have increased investment in training, down from 12 per cent.

Over the next 12 months, fewer than half of the firms that responded expect to increase turnover, and one fifth expect turnover to decrease, more than twice as many as previously did.

Jimmy Chestnutt, chief executive of the Hampshire Chamber which represents 2,000 firms, said: “As we await the coalition’s spending review, it is understandable that businesses are being cautious and showing a less optimistic mood.

“Reduced Government spending is likely to dampen some economic activity, so ministers must do all they can to help sustain business confidence.

“They must ensure that private sector growth is able to make up for public sector cutbacks.”

The survey shows one third of Hampshire business managers feel inflation is a growing worry, while just over a quarter say exchange rates are a cause for concern.

Southampton Itchen MP John Denham, newly appointed as Labour’s shadow Business Secretary, said: “We have constantly warned that if you cut too fast and too deep to deal with the deficit there’s a danger of slowing growth, putting people out of work and making it more difficult to deal with the economic challenges the country is facing.

“One survey doesn’t prove beyond doubt what is happening but it is clearly a very worrying sign.”

Fareham MP and Treasury Secretary Mark Hoban insisted: “The best way to lift business confidence is to tackle the huge budget deficit we inherited from Labour.

“It is because we are taking robust action now that the Confederation of British Industry (CBI), the British Chambers of Commerce, the OECD, the International Monetary Fund (IMF) and the World Bank have backed our plans.

Another survey sponsored by regional development agency Seeda yesterday revealed the weakest rise in new business in the region since August 2009. In the south-east activity rose at slower pace than the UK trend for the second month running, and manufacturing production growth in the third quarter stagnated.

A recent survey by Business Southampton, a lobby group, found the number of businesses increasing profits in the past six months dropped from 42 to 35 per cent.

Business Southampton CEO Sally Lynskey said: “Overall the feeling is mixed pending the Comprehensive Spending Review.”