The British Chambers of Commerce’s quarterly economic survey – the UK’s largest private sector survey of business sentiment and a leading indicator of UK GDP growth – finds that the UK and Norfolk economy ended 2018 stuck in a weak holding pattern, with stagnating levels of growth and business confidence as a result of heightened Brexit uncertainty and other economic pressures.
Key findings:
- Percentage of Norfolk manufacturing firms reporting an increase in domestic sales and orders fell drastically
- Percentage of Norfolk service companies reporting an increase in export orders and sales fell into minus figures
- Norfolk recruitment difficulties in manufacturing fell in comparison to the national average, but still remain at high levels
- Price pressures rise further for businesses, particularly manufacturers
The results of the survey of 6,000 firms, including those from Norfolk, – employing over one million people across the UK – underline the impact that the current levels of uncertainty are having on a stalling economy as growth in domestic sales and orders reduced, considerable recruitment difficulties are still being faced and price pressures persist.
In the services sector, a key driver of UK economic growth, the percentage of firms reporting an increase in domestic sales and orders weakened. Domestic activity among UK manufacturers fell drastically in the quarter.
The findings highlight the continued labour shortages in Norfolk as nearly four-fifths (79%) of manufacturers that tried to recruit report difficulties in finding the right staff, whilst in the Norfolk services sector, 74% reported that they were struggling to recruit
The survey results indicate an increase in price pressures facing firms. The percentage of manufacturers expecting to raise prices is at its highest in a year (53%) and higher than the national result of 43%. Cashflow continues to be a concern for both sectors, with the balance of firms reporting improved cash flow remaining weak.
As Westminster prepares to return from recess, the Chamber network is calling on all political parties to find a way forward and ensure that the UK does not face a messy and disorderly exit from the EU. Avoiding a chaotic Brexit would bolster business confidence and investment, and give businesses some much-need clarity on trading conditions in the near-term.
Nova Fairbank, Head of Policy, Governance & Public Affairs for Norfolk Chamber of Comemrce said:
“The latest survey suggests that the Norfolk and the UK economic conditions were worryingly subdued in the final quarter of 2018, with a number of key indicators continuing to weaken under the weight of persistent Brexit uncertainty and rising cost pressures.
“Domestic activity in the dominant Norfolk services sector weakened for the second successive quarter, with consumer-facing firms particularly downbeat amid subdued household spending levels and tightening cashflow. Our manufacturing sector had an underwhelming three months, with significant cost pressures and moderating global demand weighing on activity in the sector.”
Suren Thiru, Head of Economics at the British Chambers of Commerce, said:
“The marked increase in cost pressures for businesses in the quarter suggests that inflation will be higher over the near term, with the continued weakness in sterling maintaining the upward trend on the cost of imported raw materials. However, with our results also showing that price pressures from wage settlements remain relatively muted, there continues to be sufficient scope to keep interest rates on hold in 2019, particularly given the significant economic and political turbulence.”
Responding to the results, Dr Adam Marshall, Director General of the British Chambers of Commerce, said:
“The UK economy is in stasis. While it’s not contracting, it’s not growing robustly either. Throughout much of 2018, UK businesses were subjected to a barrage of political noise and drama, so it’s no surprise to see firms report muted domestic demand and investment. In this new year, the government must demonstrate that it is ready to act to turbo-charge business confidence.
“With little clarity on the trading conditions they’ll face in just two months’ time, companies are understandably holding back on spending and making big decisions about their futures. The government’s absolute priority now must be to provide clarity on conditions in the near term and avoid a messy and disorderly Brexit. Business communities won’t forgive politicians who allow this to happen, by default or otherwise.
“Brexit is hoovering up all of government’s attention and resources, but it’s far from the only cause of uncertainty. Given the magnitude of the recruitment difficulties faced by firms clear across the UK, business concerns about the government’s recent blueprint for future immigration rules must be taken seriously – and companies must be able to access skills at all levels without heavy costs or bureaucracy.”
Key findings in the Q4 2018 survey:
Norfolk Manufacturing sector:
- The balance of firms reporting increased domestic sales drastically fell thirty five points from +35 to 0 and those reporting improved domestic orders also fell from +30 to 0
- The balance of firms reporting improved export sales rose several points from +38 to +43, while the balance of those reporting improved export orders rose from +27 to +43
- The balance of firms expecting to raise prices in the next three months stands at +53, up from +40 in Q3
- The percentage of firms citing the cost of raw materials as the source of cost pressures continued its upwards trend from the last quarter, now at 94%, the highest since Q2 2013
- The percentage of firms attempting to recruit remained fairly static – moving upwards by only one point to 74%. Of those, 79% reported recruitment difficulties
- The balance of firms increasing investment in plant/machinery fell considerably in the quarter from +30 to +16, however investment in training rose from +30 and +42
- The balance of firms confident that turnover and profitability to increase in the next 12 months fell, from +44 to +32 for turnover and +55 to +11 for profitability
Norfolk Services sector:
- The balance of firms reporting increased domestic sales rose from +17 to +21. Those reporting improved domestic orders also rose slightly from +12 to +15.
- The balance of firms reporting improved export sales fell drastically from the previous quarter of +14 to -5, while those reporting improved export orders also fell from +10 to -9
- The balance of firms expecting to increase prices in the next three months stands at +38, down slightly from +42 in Q3
- The percentage of firms looking to recruit dipped from +73 to +70.Of those, 76% had recruitment difficulties, down slightly from a high of 84% in the previous quarter
- Cashflow remains a concern, with a balance of just +8 reporting improved cashflow
- The balance of firms looking to increase investment fell from +25 to just +9 in plant and machinery, but remained static at +21 to +20 in training
- The balance of firms confident that turnover and profitability will improve over the next year rose slightly, from +34 to +39 for turnover and +16 to +24 in profitability
