A Bradford-based accountancy firm has claimed that business optimism in the UK has fallen below the EU average for the first time in four years.

The research, carried out by Grant Thornton in its 2006 International Business Owners Survey, spoke to 7,000 companies and found that confidence in the UK's economic outlook, particularly from medium sized companies, had dropped considerably from the previous year.

Overall, 42 per cent of the 600 UK businesses polled indicated that they were optimistic about the outlook for the economy in the coming year, compared to 34 per cent who were pessimistic.

The UK now ranks 23rd most pessimistic out of the 30 countries surveyed.

Glen Beveridge, of Grant Thornton Leeds, said: "It is thoroughly disappointing to see UK optimism fall behind the EU average, especially at a time when the recent EU enlargement should provide new markets for expansion. But, in the UK, the writing has been on the wall for some time.

"Economic growth has stuttered to its slowest pace since 1992. Higher interest rates and a more onerous tax burden have reduced disposable income, with consumer spending slowing more abruptly than expected.

"For businesses, the increasing level of regulation and red tape also presents a growing challenge in 2006."