GB suffered a straight sets defeat in Saturday's doubles and must now win Sunday's reverse singles to retain their status in the tennis elite.
Captain Lloyd said: “I thought it would be closer but Austria were always the favourites.
"Our boys are disappointed. They didn’t play as well as they can.
"But it’s all about winning three matches and we still think we can win the match.”
Jamie Murray and Ross Hutchins had no answer to Jurgen Melzer and Julian Knowle who eased to a 6-4 6-3 6-1 victory.
GB are now relying on Andy Murray to beat Melzer and an Alex Bogdanovic win against Austrian No2 Alexander Peya.