The British Chambers of Commerce says businesses across a range of sectors and sizes in the region are reporting a growing sense of pessimism.

In the service sector, 68 per cent of businesses in the south east said they expected a drop in profitability over the coming 12 months.

Sales have also dipped enormously. A staggering 78 per cent of businesses with 200 to 499 employees said they had seen a drop in domestic sales over the last quarter.

In the manufacturing sector, 56 per cent of the region's businesses overall reported a drop in domestic sales, and 59 per cent saw a similar drop in their order books.

Overall, the survey painted a portrait of dropping confidence across the south east, mirroring the Portsmouth and South East Chamber's localised survey, reported by BusinessWeek in September.

Maureen Frost, chief executive of the Portsmouth and Hampshire Chamber of Commerce, said despite the economic concerns south Hampshire firms were continuing to fare well.

She said: 'I don't think things have got as bad in Portsmouth as they have in other parts at the moment. People are understandably keeping a watchful eye on it, and there is a level of concern, but there are still a lot of positives in the south east.

'Confidence delays investment decisions – if people are looking to invest in new equipment, premises, training, they might put that on hold, and the longer it stays on hold the greater the chance it will have some knock-on effects.'

The British Chamber of Commerce's third quarter report also found that 23 per cent of manufacturers reported problems with recruiting, against just six per cent the previous quarter.

In the service sector, the problem was more pronounced, with 78 per cent reporting recruitment problems, against 69 the previous quarter.

The report said: 'The service sector in the south east continues to perform poorly. Domestic sales remain stagnant.'