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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 7,100 businesses, the survey shows that UK economic growth remained subdued in the first quarter of 2018, despite a strong export performance.
In the service sector, a key driver of the UK economy, the proportion of firms reporting improved export sales and orders rose slightly, although overall growth remains muted and relatively unchanged from the previous three months. Consumer-facing industries continue to report tougher trading conditions than B2B firms. In the manufacturing sector, the proportion of firms reporting improved export sales stands at its highest since Q2 2014.
However, domestic factors continue to weigh on the UK economy. Fewer firms in the manufacturing sector saw an increase in domestic orders, and the balance of firms reporting an increase in domestic sales is now at its lowest level since Q4 2016. Tighter cash flow is an increasing concern for many, and the skills shortages that have plagued businesses for the last few quarters have failed to ease significantly, with those in both sectors still struggling to recruit.
There has been a small, but welcome, uptick in business confidence – but amid a troubling domestic backdrop much more needs to be done to safeguard the future of the economy. A strong focus on fixing the fundamentals of business – reducing the upfront costs, reforming the Apprenticeship Levy, and boosting our domestic physical and digital infrastructure – will go some way to removing many of the barriers which are holding back business communities across the country.
Key findings in the Q1 2018 survey:
Commenting on the results, Dr Adam Marshall, Director General of the British Chambers of Commerce, said:
“What growth we see in the UK economy is due principally to strong global trading conditions, rather than domestic demand, which remains muted. Uncertainty, recruitment difficulties and price pressures remain persistent concerns for businesses of every shape and size, even if short-term confidence levels remain resilient.
“Even with a standout performance from manufacturing exporters able to reap the benefits of lower Sterling, the UK economy as a whole is treading water, rather than powering ahead.
“It’s time for the UK government to multitask and demonstrate that it can do more than negotiate Brexit. A far stronger domestic economic agenda is needed to fix the fundamentals needed for business to thrive here at home.
“At a time when firms face stratospheric up-front costs, the apprenticeship system is in crisis, roads are being allowed to crumble, mobile phone and broadband ‘not-spots’ are multiplying, and businesses are being blocked from hiring talent via arbitrary visa caps, it’s obvious that the key to improved productivity and competitiveness lies in getting the basics right.
“Sorting these business fundamentals must move to the top of the agenda - and fast.”
Suren Thiru, Head of Economics at the British Chambers of Commerce, said:
“The results indicate that UK GDP growth continued to underwhelm in the first quarter of 2018. Activity in the dominant services sector was muted in the quarter, with most of the key indicators remaining below their pre-EU referendum levels.
“Our findings suggest that cash flow is increasingly an issue for businesses who remain under pressure from a combination of high upfront business costs, subdued financing levels and unfair payment practices. Tightening cashflow is a key business concern as it can leave firms exposed to sudden changes in economic conditions.
“UK exporters enjoyed another strong quarter, boosted by the improving outlook for the global economy. There was an encouraging uptick in investment intentions and business confidence. If this trend continues, we could see overall business activity pick up in the coming quarters.
“The latest results also indicate that inflation is now on a downward trajectory, with inflation expectations easing in the quarter. Significantly, firms continue to report little upward pressure from pay settlements. While we expect interest rates to rise next month, with UK economic conditions subdued and inflation weakening, the case for a further tightening in monetary policy continues to look limited at best.”