BCC Quarterly Economic Survey: Manufacturing boost fails to lift UK growth

Friday 20 October 2017

The British Chambers of Commerce (BCC) publishes its Quarterly Economic Survey – the UK’s largest and most authoritative private-sector business survey.

Based on the responses of over 7,100 businesses, the survey shows that despite improvements in the manufacturing sector, the UK economy grew at a muted rate in the third quarter of 2017.

In the manufacturing sector, the proportion of firms reporting improved domestic sales and orders both rose in the quarter to their highest level since Q1 2015. Export sales and orders also improved, as stronger recent economic growth in a number of key markets has helped support demand for UK products.

However, in the services sector, traditionally the main driver of UK economic growth, domestic sales and orders remained static in Q3, as did the sector’s employment expectations, investment in training, and confidence in profitability and turnover. Almost all services indicators remain below their pre-EU referendum levels, with consumer-focused businesses reporting weaker growth rates compared to B2B firms.

The results of the survey also show the prevalence of recruitment difficulties facing UK businesses, which worsened further in Q3. Almost three-quarters of manufacturers reported difficulties hiring staff, and in services, the percentage rose to its highest level since Q1 2016, and stands at three times the long-term average.

The muted results make clear the need for the upcoming Autumn Budget to provide a fillip to the economy – and begin to address some of the issues undermining the UK’s growth prospects, including skills gaps, high upfront costs and aging infrastructure. With Brexit-related uncertainty growing, the Q3 QES demonstrates the need for action to support a competitive and enterprising business environment.

Commenting on the results, Dr Adam Marshall, Director General of the British Chambers of Commerce, said: “The uninspiring results we see in our third quarter findings reflect the fact that political uncertainty, currency fluctuations and the vagaries of the Brexit process are continuing to weigh on business growth prospects.

“The Chancellor’s Autumn Budget is a critical opportunity to demonstrate that the government stands ready to incentivise investment and support growth here at home. A failure to act, or a conscious choice to provide a short-term sugar hit to the electorate rather than the protein boost the economy needs, would have significant consequences for the UK’s medium-term growth prospects.

“While much of Westminster and Whitehall is distracted by Brexit, business needs action now on the home front. The solutions to some of the biggest issues currently facing our firms – including high up-front costs, a lack of incentive to invest, and a need for better infrastructure – are entirely within the power of the UK government to deliver.

“Now is the time to take bold action, and create the conditions to help the economy rebound from a period of anaemic growth. Government must demonstrate competence, coherence, and above all a clear plan to support the economy through a period of change.”

Suren Thiru, Head of Economics at the British Chambers of Commerce, said: “The latest results also confirm that rising costs remains a worry for businesses, particularly in manufacturing. However, while still high by historic standards, the easing in a number of indicators of pricing pressures since the start of the year suggests that inflation will peak sooner rather than later, possibly by the end of the year.

“Against this backdrop, it seems extraordinary that the Bank of England are considering raising interest rates. With UK economic conditions softening and continued uncertainty over Brexit, it is vital that the MPC provides monetary stability. We’d caution against an earlier than required tightening in monetary policy, which could hit both business and consumer confidence and weaken overall UK growth. While interest rates need to rise at some point, it should be done slowly and timed to not to harm the UK’s growth prospects.”

Forthcoming Events

July 24 2019 6:00PM / 6.00-9.00pm
Fenland Quiz and Hog Roast
August 9 2019 2:00PM / 2.00 - 4.00pm
Summer Garden Party
September 2 2019 / 5.00-7.00pm
Informal Networking Evening – Huntingdon
September 4 2019 / 5.00-7.00pm
Informal Networking Evening – Stamford
September 9 2019 / 5.00-7.00pm
Informal Networking Evening – Ely
September 10 2019 3:00PM / 3.00-5.30pm
Meet the Neighbours - Stansted