BCC’s Quarterly Economic Survey points to evidence of stalling economy and challenges for business

Tuesday, 10th January 2012

• QES results point to a further deterioration in the economic situation
• Rises in domestic and export sales in the services sector in the Thames Valley

The British Chambers of Commerce’s new Quarterly Economic Survey (QES) released today shows concerning results for Q4 2011, and points to a stalling economy. The new survey, comprising some 7,850 responses from businesses across the UK, shows declines in most indicators across both manufacturing and services in the last quarter. While measures for the previous three months indicate minimal growth, expectations for the coming three months have significantly weakened.

The results do not indicate a recession, and are still better than those seen in the worst phase of the last downturn. However, they are a cause for concern, and show that the improvements in 2010 and early 2011 have largely been cancelled out. The worsening international situation and the growing risks facing the eurozone, present challenges for UK exporters and business confidence as a whole.

Commenting on the results, Clair Prosser, policy executive, Thames Valley Chamber, said:

“The results for the South East and Thames Valley indicate that although manufacturing sales are considerably weaker (-26%) than the national picture, domestic and export sales in the service sector have risen by 10% and 14% respectively. This is higher than the national figure, indicating the continued strength of the services industry in this region. Export sales is an area where future growth will emerge and the Government must do everything to support exporters.”

Other statistics from the national report:

Employment
• Figures for the last three months showed a fall in the balance of manufacturers and service sector firms expanding their workforce.
• Firms in both sectors do not seem optimistic about future recruitment. In manufacturing the employment expectations balance plummeted 18 points to -8%, and in services falling four points to +2%.

Business confidence & investment
• Confidence among businesses fell in the last quarter. The balance measuring manufacturers’ confidence in turnover fell by 19 points (to +14%), and in profitability the balance was down seven points to +9%.
• In the service sector, the turnover confidence balance fell five points to 19%, and profitability confidence fell eight points to +2%, the worst level since Q2 2009.
• The balances measuring manufacturers’ investment also fell in the last quarter. Plans by manufacturers to invest in both plant & machinery and training fell. In the service sector there was a slight increase in planned investment in plant & machinery, though the level is still weak at +2%, but a fall in plans to invest in training.

Cashflow & price pressures
• Pressures on firms to raise prices are moderate in both sectors. The balance of manufacturing firms reporting pressure to increase prices fell 2 points, to +29%. The balance of service firms expecting to raise prices rose 2 points, to +24%.
• Managing cashflow (the movement of cash in and out of the business) still remains a problem for many businesses. The cashflow balances improved for manufacturing (rising 10 points to +2%) though remain at a weak level. The services cashflow balance remains in negative territory, falling two points, to -8%.

Clair continued: “A slowdown across the eurozone is inevitable, but Britain need not suffer a similar fate. We simply cannot afford to compromise on economic performance. The UK does have the potential to recover and make its way in the world. We have the talent, the energy, and the enterprise. All we need is an environment that puts business first. We must recognise that business is good for Britain. Boosting growth in our businesses will boost the economy and let Britain lead on the international stage.

“Ministers need to move faster on promises made in the Chancellor’s Autumn Statement. Measures to improve the flow of credit to businesses, reforms of our complex planning system, and investment in infrastructure projects are all needed now. If the implementation of the credit easing programme takes much longer, the economy would be better served by the creation of a full blown SME bank. On infrastructure, the government must bite the bullet and move ahead on high speed rail, airport expansion, toll roads and liberalisation of the planning system. Britain’s economy is at a critical stage – and now is not the time to shy away from the radical decisions needed to inspire confidence and increased investment for years to come.”

Ends

Notes to editors:

Balance figures, referred to throughout this report, are determined by subtracting the percentage of companies reporting decreases in a factor from the percentage of companies reporting increases.

The British Chambers of Commerce Quarterly Economic Survey is the largest and most representative independent business survey of its kind in the UK. Each quarter, over 6,000 businesses – belonging to Chambers of Commerce in every region of the country – participate in the QES. Businesses are questioned on a wide range of issues, including: home sales and orders, export sales and orders, employment prospects, investment, recruitment difficulties, cashflow, confidence and price pressures.

The QES is the first economic indicator of the quarter, published in advance of official figures and other private surveys, and it consistently mirrors trends in the national economy. For this reason the survey is closely watched by policymakers such as the Treasury, the Bank of England and the new Office of Budget Responsibility.

Full report available on request
Chamber Press Office 01753 870552