BCC Quarterly Economic Survey: Signs Inflation Pressure Easing
BCC Quarterly Economic Survey: Signs Inflation Pressure Easing
· Less than half (45%) of UK firms expect their prices to increase in the next three months, down from 55% in Q1.
· Labour costs are the biggest driver of price rises, cited by 68% of businesses.
· Domestic sales, cashflow, turnover and profitability indicators all remain largely unchanged from Q1.
The BCC’s Quarterly Economic Survey (QES) for Q2 2023 shows that less than half of firms now plan to raise prices in the next three months as cost pressures ease.
But the data also reveals that the main factor for increasing costs is now coming from wages rather than utility bills or raw materials.
The survey, by the BCC’s Insights Unit, of over 5,000 firms – 92% of whom are SMEs – also reveals business performance across different sectors varies considerably, with hospitality and retail firms suffering more widely from cashflow difficulties.
The research took place between 15 May and 9 June and before the Bank of England increased the base rate to 5%. Respondents were split into 27% manufacturing and 73% services industries, with 47% exporting.
Growth in business activity remains weak, with no significant improvement to sales and cashflow data.
The percentage of firms reporting increased domestic sales remained largely static, with 35% reporting a rise (broadly unchanged from 34% last quarter). Meanwhile 24% reported a decrease and 41% reported no change.
For cashflow, more businesses continue to report a decrease, rather than an increase and again the picture remains largely unchanged since Q1. Just over one in four (26%) businesses said their cash flow has increased over the last three months (25% in Q1), while 29% have seen it decrease (30% in Q1).
Pressures remain highest in the retail and hospitality sectors with 38% and 37% respectively reporting reduced cashflow, while PR and Marketing was the most positive sector with 33% reporting growth.
After business confidence showed signs of a rebound in Q1 2023, it has now stalled again.
There was a small increase in the percentage of firms believing their business turnover will rise over the next 12 months, up to 54%, from 52% in Q1.
Profitability confidence also improved slightly to 44% from 42% in Q1, but it continues to remain weaker than turnover confidence.
This slightly improved outlook is not translating through to increased business investment.
The number of respondents reporting an increase to investment in plant/equipment dropped to 23% from 25% in Q1. Over the last six years this measure has dropped as low as 9% of firms, at the start of the pandemic, but it has never gone higher than 28% (Q1 2018).
Inflationary pressures continue to ease, but still remain the top concern.