Retail sales fell sharply in London and business confidence across Britain hit a two-year low in the wake of the July bombings on the capital, separate surveys published yesterday showed.

The London Retail Consortium (LRC) said shop sales fell at their sharpest annual rate in July since comparable records began in October 2002 as visitors shied away from the UK capital after last month's bomb attacks.

Meanwhile, a survey of 200 companies by Lloyds TSB Financial Markets showed business confidence after the deadly bombings at its lowest level since the Iraq war started in March 2003.

More than 50 people died on July 7th when suicide bombers exploded devices on three London underground trains and a bus, but no one was hurt on July 21st when bombs in a similar series of attacks failed to explode.

The Lloyds TSB survey, conducted the week after the earlier, deadly, attacks, showed 40 per cent of businesses were pessimistic about the outlook for the British economy for the next three months, compared with 26 per cent in June.

The number of companies expecting business conditions to improve fell to 42 per cent in July from 55 per cent in June.

Separately, the LRC said sales in London were 8.9 per cent lower in July than a year ago on a like-for-like basis, the steepest fall since the survey began in October 2002, after a rise of 3.6 per cent in June.

The drop indicated that fears of further attacks as well as disruption to the city's transport network from the July attacks and numerous security alerts were discouraging visitors to the capital, the LRC said.

"The question now is whether some consumers will continue to stay away from central London and whether tourists will be deterred by the treat of further disruption," said LRC director Kevin Hawkins.

The British Retail Consortium, of which the LRC is a division, said sales across the country fell 1.9 per cent on an annual like-for-like basis in July.