The British Chambers of Commerce (BCC) today (Friday) 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 despite improvements in the Norfolk manufacturing sector, the Norfolk and the UK economy as a whole grew at a muted rate in the third quarter of 2017.
In the Norfolk manufacturing sector, the proportion of firms reporting improved domestic sales and orders both rose in the quarter to their highest level since Q4 2016. Export sales and orders also improved, as stronger recent economic growth in a number of key markets has helped support demand for Norfolk products.
However, in the services sector, traditionally the main driver of UK economic growth, domestic sales and orders remained static in Q3, as did the sector’s expectations to invest in training, and confidence in profitability and turnover. Almost all services indicators remain below their pre-EU referendum levels, with consumer-focused businesses reporting weaker growth rates compared to B2B firms.
The results of the survey also show the prevalence of recruitment difficulties facing Norfolk businesses, which continued to increase in Q3. Almost three-quarters of manufacturers reported difficulties hiring staff, and in services, nearly two thirds reported difficulties.
The muted results make clear the need for the upcoming Autumn Budget to provide a fillip to the economy – and begin to address some of the issues undermining Norfolk’s growth prospects, including skills gaps, high upfront costs and sub-standard infrastructure. With Brexit-related uncertainty growing, the Q3 QES demonstrates the need for action to support a competitive and enterprising business environment.
Key findings in the Q3 2017 survey:
Norfolk Manufacturing sector:
· The balance of firms reporting increased export sales rose from +11 to +27, and export orders from +7 to +27, the highest level since Q4 2016. The balance of firms reporting improved domestic sales also rose from +12 to +19, and orders from +10 to +21.
· The percentage balance of manufacturing firms expecting the price of their goods to increase over the next three months fell in the last quarter from +33 to +26, despite the cost of raw materials still being a key concern to most manufacturers.
· Concerns over exchange rates has spiked, with the balance increasing from +47 to +76.
· The percentage of manufacturers attempting to recruit increased, rising from 68% to 83%. The percentage of firms reporting greater recruitment difficulties rose from 63% to 74%.
· More manufacturers reported confidence in investing in plant and machinery, which rose drastically from -3 to +19.
· Confidence in the manufacturing sector rose slightly, with +31 of firms confident that profitability will increase over the next 12 months – but turnover confidence dipped from +23 to +19.
Norfolk Services sector:
· Exports remained fairly flat, with the balance reporting static, with export sales standing at +12 (down from +13 in the previous quarter) and orders at +2 (up from 0). The balance for domestic sales also remained static at +14 and orders dipped from +8 to +6.
· The percentage of businesses attempting to recruit remained flat at +64. With the percentage of services firms reporting greater recruitment difficulties, decreasing from 67% to 63%.
· The percentage balance of services firms expecting the price of their goods to increase over the next three months remained rose from +29 to +33.
· Confidence remains static, with the balance of service firms confident of improved turnover (+32) and profitability (+21) remaining unchanged from the previous quarter. Both balances remain below their pre-EU referendum levels.
Commenting on the results, Nova Fairbank, Public Affairs Manager for Norfolk Chamber said
“The uninspiring Norfolk results we see in the third quarter findings reflect the fact that political uncertainty, currency fluctuations and the vagaries of the Brexit process are continuing to weigh on Norfolk business growth prospects.
“The Chancellor’s Autumn Budget is a critical opportunity to demonstrate that the government stands ready to incentivise investment and support growth here at home. A failure to act, or a conscious choice to provide a short-term sugar hit to the electorate rather than the protein boost the economy needs, would have significant consequences for both Norfolk and the UK’s medium-term growth prospects.
“While much of Westminster and Whitehall is distracted by Brexit, business needs action now on the home front. The solutions to some of the biggest issues currently facing our firms – including high up-front costs, a lack of incentive to invest, and a need for better infrastructure – are entirely within the power of the UK government to deliver.
“Now is the time to take bold action, and create the conditions to help the economy rebound from a period of anaemic growth. Government must demonstrate competence, coherence, and above all a clear plan to support the economy through a period of change.”
Suren Thiru, Head of Economics at the British Chambers of Commerce, said:
“The manufacturing sector saw a welcome improvement across a number of indicators, boosted in part by stronger growth in key export markets. However, the relative size of the sector means that its contribution to UK GDP growth is likely to have remained limited this quarter.
“The services sector remains under pressure, and with most indicators broadly static in the quarter, the sector has yet to recover from the loss of momentum suffered in the wake of the EU referendum.
“The latest results also confirm that rising costs remains a worry for businesses, particularly in manufacturing. However, while still high by historic standards, the easing in a number of indicators of pricing pressures since the start of the year suggests that inflation will peak sooner rather than later, possibly by the end of the year.
“Against this backdrop, it seems extraordinary that the Bank of England are considering raising interest rates. With UK economic conditions softening and continued uncertainty over Brexit, it is vital that the MPC provides monetary stability. We’d caution against an earlier than required tightening in monetary policy, which could hit both business and consumer confidence and weaken overall UK growth. While interest rates need to rise at some point, it should be done slowly and timed to not to harm the UK’s growth prospects.”
