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Business leaders' confidence in UK economy at lowest so far this year - survey

FILE PHOTO: Construction work is seen on high-rise office blocks in the financial district of London, Britain, July 11, 2018. REUTERS/Phil Noble

LONDON (Reuters) - Business leaders' confidence in the British economy has fallen to its lowest point this year reflecting the impact of uncertainty over Britain's exit deal with the European Union, according to a survey published on Monday.

With less than eight months to go until Britain is due to leave the EU, the government is yet to agree the terms of its departure with Brussels and has stepped up planning for the possibility of failing to reach a formal agreement.

The survey of 750 business leaders, carried out by the Institute for Directors (IoD) employers group, found that after general economic conditions, uncertainty around trade with the European Union was the biggest concern.

Asked how optimistic they were about the wider economy over the next 12 months, more said they were pessimistic than optimistic, resulting in a net confidence level of -16 percent.

That compared with -11 percent in June, and down from a positive rating of 3 percent in April. The IoD said 44 percent cited uncertainty over the trading status with the EU as having a negative impact on their organisation.

"Despite cautious optimism emerging amongst the business community earlier in the year, any momentum appears to have dwindled," Tej Parikh, Senior Economist at the Institute of Directors, said in a statement.

"We're heading back to the levels of pessimism we saw before progress was made on phase one of Brexit talks."

The survey, carried out July 11-26, found respondents were more positive about the prospects for their own organisations, with a net positive outlook of 37 percent, although this was also down from 46 percent in June.

Parikh said that as well as uncertainty over Brexit, larger businesses had been hit by other headwinds including oil price rises, while smaller firms were suffering from high costs, skills shortages and weak productivity.

"It's unfortunate that the Brexit process has limited the bandwidth of government to meet equally pressing domestic economic challenges, that needs to change sooner rather than later," he said.

(Reporting by Kylie MacLellan. Editing by Jane Merriman)