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Encouraging signs from UK businesses, but growth is still too slow
Tuesday, 3rd April 2012
The British Chambers of Commerceâ€™s new Quarterly Economic Survey (QES) released today shows encouraging results for Q1 2012, with most balances recording increases on the last quarter. The new survey, comprising almost 8,000 responses from businesses across the UK, shows a welcome improvement on the results of Q4 2011 which pointed towards stagflation.
While the results are more encouraging than the previous quarter, they show that growth is still too weak, with the balances still below those seen in 2007 before the recession. Many manufacturing balances are now at a satisfactory level, but the service sector balances are sluggish.
Commenting on the results, Clair Prosser, Policy Executive, Thames Valley Chamber, said:
â€œItâ€™s encouraging to see that businesses are feeling more confident at the start of 2012 than they were at the end of 2011. But that underlines the need to support and foster growth and investment by companies to ensure that the increases we have seen in the first quarter continue. The picture in the Thames Valley region both East and West, shows an improvement in turnover and profitability which reflects the continued stability we have seen throughout the last few years. Inflation and increased competition are concerns in the West in particular.â€
“While the government has promised positive changes that will help businesses, improved transport infrastructure and deregulation for example, they are yet to become a reality. These medium- and long-term measures must be brought forward to help businesses grow and create jobs. Access to finance is still a real problem for many firms, and more must be done to mean that this doesnâ€™t threaten recovery. More radical measures, such as a state backed SME lender, should be implemented to address the gap in business funding.â€œ
Balances measuring domestic and export activity across firms showed welcome increases, and more businesses are looking to invest in employing more staff, training, and plant and machinery. Despite concerns about inflation decreasing, recent increases in oil and food prices may alter this over the next few months.
â€¢ Domestic balances have improved over the last quarter, but remain below pre-recession levels. Manufacturing and service sector balances for home deliveries and forward-looking orders rose to the strongest levels since Q2 2011.
â€¢ Manufacturing home deliveries up 12 points to +12%, and home orders up 19 points to +6%. In the service sector, the home deliveries balance rose eight points to +10% and the home orders balance is up 16 points to +7%.
â€¢ For both manufacturing and service sector firms, the balances returned to Q2 2011 levels.
â€¢ Though stronger than domestic orders, exports are still below levels seen in the BCCâ€™s Quarterly Economic Surveys prior to the recession.
â€¢ The manufacturing balance for export deliveries rose 12 points, to +24%, and for export orders increased 15 points, to +20%. The service export deliveries balance rose six points, to +16% and for export orders the balance is up 13 points, to +12%.
â€¢ Figures for the last three months showed an increase in the balance of manufacturers and service sector firms expanding their workforce. However, the manufacturing employment balance is stronger (at +16% – the strongest since Q4 2010), than the service sector balance which is still weak at 4% (an increase of two points).
â€¢ Firms in both sectors are more optimistic about future recruitment than during Q4 2011. The balance of manufacturing firms looking to increase workforces surged 23 points to +15%, and in the service sector it is up nine points to +11% – both levels last seen in Q2 2011.
Business confidence & investment
â€¢ Confidence among businesses has increased on the previous quarter, but remains weak by historical standards, particularly for services. The balance measuring manufacturersâ€™ expectations for increasing turnover and profitably jumped to levels last seen in Q2 2011. And among service sector firms, turnover confidence increased to +30% (last seen in Q2 2011), and profitability confidence rose to 14% (back to levels in Q4 2010).
â€¢ More firms are looking to increase investment. Plans by manufacturers to invest in plant and machinery increased to +17% (the strongest level since Q4 2010), and intentions to invest in training increased by seven points to +17% (last seen in Q1 2008). In services, the results were positive but weaker, with the balance measuring investment in plant and machinery up to +5% and in training to +13% – both the strongest levels since Q2 2008.
Chamber Press Office