Retail business confidence has hit its lowest level this year and store chiefs expect sales to slow in the next 12 months.

Confidence among retailers and wholesalers, as measured by the ICAEW/Grant Thornton business confidence index, has fallen to 1.7points. The figure compares to the national average of 11.9 points and is down from 10.8 points in the third quarter of 2010.

Only 37% of retailers are more confident in their economic prospects over the next 12 months compared to the last 12, in contrast to a national business average of 46%.

Retailers expect sales growth to slow to 2.6% in the next 12 months while across the economy as a whole, sales are expected to rise by 3.6%.

Grant Thornton head of retail Barry Knight said: “Retailers’ subdued expectations for the next 12 months are founded in some real concerns, mainly rises in VAT, falling house prices, spending cuts and rising commodity prices.”