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The British Chambers of Commerce (BCC) today (Thursday) publishes its Quarterly Economic Survey – the UK’s largest and most authoritative private-sector business survey. Based on the responses of over 7,700 businesses in Q2 2017, the results for both sectors indicate that the UK economy grew at a subdued rate in the second quarter of 2017.
The services sector, a key driver of UK economic growth, saw indicators of domestic activity, employment and investment continue to weaken slightly in the quarter. Consumer-facing industries such as retail outlets and hotels reported weaker growth rates compared to B2B businesses in the quarter.
The survey shows export sales and orders in the manufacturing sector remain solid and well above historical averages. While export activity increased marginally in the services sector, it remains below historic levels.
The balance of firms expecting prices to rise has decreased across both sectors, but remains close to the historically high levels seen in the wake of the EU referendum. The percentage of manufacturers reporting raw materials as the key driver of increased prices remains near record highs.
The findings indicate that while confidence in future turnover and profitability is improving, the balance of service firms revising their investment in training upwards is also at historical lows, particularly for retailers and wholesalers. Both sectors report low levels of improvement in cash flow.
Key findings in the Q2 2017 survey:
Commenting on the results, Dr Adam Marshall, Director General of the British Chambers of Commerce, said:
“Our latest survey results, which reflect the outlook of companies in all sectors and locations of the UK, indicate that for many businesses growth is static at best, and at worst, beginning to slow.
“It's time for the economy to be put back at the heart of the agenda, with a focus on creating the best possible environment for business growth all across the UK. Government must play its part by tackling the issues that hold businesses back, including labour shortages, weaknesses in our physical and digital infrastructure, and high upfront costs which dampen investment intentions and firms' growth potential. Any talk of higher business taxes to pay for politically-motivated spending must be quashed swiftly, to avoid undermining business confidence further.
"The subdued growth picture also underlines the importance of getting as much clarity on the Brexit transition as possible, as quickly as possible over the coming months."
Suren Thiru, Head of Economics at the BCC, said:
“Our latest survey indicates that UK economic activity remain subdued in the second quarter of 2017.
“Services sector activity stuttered a little with a number of the key balances weakening this quarter. Consumer-focused industries were the worst performers - further evidence that rising inflation is dampening consumer activity. That said, the sector is likely to have been the key driver of second quarter growth. While the manufacturing sector enjoyed a solid quarter, the improvements are from a low base and the longer-term trends suggests that the sector’s contribution to overall UK growth will not be enough to offset weaknesses elsewhere.
“The latest results also point to a continued pick-up in export activity for both service sector firms and manufacturers. The improving growth outlook for some of the UK’s key international markets and the weaker sterling have helped improve trading conditions for UK exporters.
“Rising inflation remains the key challenge for the UK economy this year. Consumer prices are likely to keep rising in the coming months as the recent sizeable increases in the cost of raw materials and other overheads filter through supply chains. However, while still high, the drop in the balance of firms expecting prices to rise indicates that price pressures at the factory gate have moderated a little.”