Chamber News

The Chancellor must take bold steps to unlock the untapped potential of UK business if the economy is to weather continued global headwinds. 

BCC research shows less than a quarter of firms are investing, as fears over high inflation and interest rates, alongside concerns around trade barriers and skills shortages, continue to bite. 

The BCC Autumn Statement submission has 23 recommendations and includes five major policy calls that could put the economy on the best footing possible to absorb further shocks. They are: 

• Reforming the planning system to speed up infrastructure projects and give businesses much needed room to grow.

• Introducing a rolling five-year guarantee for the continuation of the full expensing tax break, to increase take up.

• Upgrading the energy grid to unlock new business development and investment.

• Extending business rates relief for hospitality and retail businesses, freezing the multiplier, and looking at reforming the system to better reflect firms’ ability to pay. 

·        Introducing tax breaks to encourage firms to offer Occupational Health benefits that keep people in work. 

Shevaun Haviland, Director General of the BCC, said: “Businesses are holding onto their money as inflation remains stubbornly high and fears over further interest rate rises continue. 

“With the ongoing war in Ukraine and the awful new developments in the Middle East there is real concern over oil prices and further turmoil in the wider financial markets. 

“This is likely to further impact the Chancellor’s headroom to provide any fiscal stimulus. But we think there are some options open to him that could make a real difference without breaking the bank. 

“Businesses have told us they have billions of pounds in private investment waiting to be pumped into the UK economy, but our creaking planning system and overloaded grid are holding that back. 

“It’s vital we unlock this money and take steps to put British business in the best place possible to remain competitive in the global marketplace and weather any further shocks. 

“Business confidence is in a much better place than it was a year ago. But the pandemic, the energy costs crisis and higher interest rates all mean firms are less resilient than they were. 

“If we invest more in our energy grid network then private funds will follow and there will be a multiplier effect that will ripple out across the UK’s supply chains.” 

Reacting to the latest ONS inflation data, David Bharier, Head of Research at the British Chambers of Commerce said:  

“Today’s figure, showing the CPI is stuck at 6.7%, shows that inflation for consumers remains stubborn. However, prices in the production sector continue to fall as the PPI rate stands at –2.6%. 

“Our Quarterly Economic Survey has been showing a diminishing percentage of firms expecting their prices to rise for five quarters running, albeit this indicator remains at a high level.  

But this is just part of the picture, as our research finds that most SMEs report no increases in sales, exports, or investment. The rise in interest rates has also emerged as a prime concern for almost half of businesses, with increased borrowing costs another barrier to contend with. 

“Businesses need clarity on interest rates, as well as a longer-term plan for growth in the economy, focusing on infrastructure, skills, and alleviating trade barriers. 

Reacting to the latest ONS data on vacancies and wages, Jane Gratton, Deputy Director of Public Policy at the British Chambers of Commerce said: “There are some positive signs in this data – as vacancies continue to fall and the total number of jobs in the economy remains near record highs. “But businesses are still finding it tough. Vacancies remain well above pre-pandemic levels and BCC research tells us almost three quarters of firms trying to recruit are struggling to get the people they need. “Wages are outpacing inflation, with candidate’s expectations and workforce pay settlements remaining a major concern for employers. “With recent shifts in government policy, and continued economic uncertainty clouding the picture ahead, it is likely some firms are adopting a wait and see approach on recruitment. “Underneath these headline figures the skills crisis continues and the overall picture remains challenging. Policymakers must do more to help businesses invest in skills and, at the same time, find ways to ease sectoral labour supply pinch points.”

Reacting to the latest Office for National Statistics data on GDP, David Bharier, Head of Research at the BCC, said:  

“With GDP growing by 0.3% in the three months to August, and by 0.2% on a monthly basis, the UK economy is holding up but remains in a precarious state. The production sector in particular has seen worrying data revisions showing stark monthly falls in growth. 

“Our research is clear about the issues UK firms are facing – three years of economic shocks, high inflation and interest rates, skills shortages, and trade barriers with the European Union. Consequently, most SMEs report no increase in their investment plans. 

“Businesses need to see a strategic vision for the long-term framework for investment in the UK. Recent policy announcements around projects, such as HS2, will have generated more uncertainty for businesses searching for stability.” 

Reacting to the latest Office for National Statistics data on Trade, William Bain, Head of Trade Policy at the BCC, said:  

“August was not a good month for UK goods exports. There were falls in both EU and rest of the world trade – where after removing the effects of inflation, volumes fell by 7.2% month on month.  

“The export gains of July went into reverse during August, which brings the UK more into line with the global trade picture for June-July this year.   

“On the services front, it was another broadly flat month for UK exports – suggesting that the growth in overseas demand for services from last year is not being sustained. This may be a function of weaker than expected global economic conditions, especially in consumer spending.   

“The overall picture on UK goods exports volumes to the EU has been flat over the last 18 months, when you remove the effects of inflation. The BCC has recommended several areas where this could be addressed, including a veterinary deal, youth mobility schemes, and improved conditions for firms on VAT compliance and fiscal representatives.”   

In Depth Analysis 

There was a 4.6% fall in UK goods export chained volumes (the measure which removes the effects of inflation) on the previous month, and a 1.1% decline in goods imported. The trade deficit increased slightly by £0.3bn to £12.7bn in the three months to the end of August.  

Goods export volumes to the EU declined by 1.8% month on month, and to the rest of the world by 7.2% month on month. Goods imports volumes from the EU fell by 3.2% from July but import volumes from the rest of the world rose by 1.7%.  

Estimated UK services export performance remained flat for a further month – on both the chained volumes and current value measures.   

Imports 

The fall in goods imports from the EU was driven by reduced chemical, machinery, transport equipment and manufactured goods imports. Fuel imports rose slightly compared with July 2023. A rise in non-EU goods imports was down to increased gas imports from Norway, and higher levels of manufactured goods from China.  

Exports 

Exports of drink, tobacco and other manufactured goods fell slightly to the EU during August 2023. Exports to the rest of the world experienced downward pressures in August in the chemicals, machinery, cars (to US and China) and fuels sectors. 

More detail on the ONS data can be found here. 

Image – Chamber Canva Pro 2023

• Just over one third of Norfolk firms (36%) now expect their prices to increase in the next three months, down from a 61% high in Q1.
• Labour costs are the biggest driver of price rises, across most sectors, cited by 68% of all businesses.
• Domestic sales, cashflow, turnover and profitability indicators are stable but remain at a low level.
• Business investment sees a drop in the manufacturing sector, and continues its long-term flatlining trend in other sectors whilst the percentage of Norfolk firms worried about interest rates remains a concern at 49%, up slightly from 46% in Q2 . 

The BCC’s Quarterly Economic Survey (QES) for Q3 2023 shows the percentage of firms expecting to raise prices in the next three months has fallen for the fifth consecutive quarter. The data also reveals that for the second quarter running the main factor for increasing costs is coming from wages. The survey by the BCC’s Insights Unit of over 5,000 firms, including those in Norfolk – 95% of whom are SMEs – also reveals business performance across different sectors varies considerably. The research took place between 21 August and 14 September before the Bank of England decided to hold the interest rate at 5.25%. Respondents were split into 23% manufacturing and 77% services industries, with 48% exporting. Activity in the service sector ticks up but manufacturing is lagging behind The percentage of all Norfolk firms reporting increased domestic sales increased to 20%, a positive rise from -5% last quarter. This is mainly in the services sector however and differs from the national picture which remained unchanged from Q2 at 35%. Meanwhile 41% reported no change. For cashflow, manufacturing businesses in Norfolk saw a significant drop after 3 consecutive quarters of growth, meanwhile the services sector returned to neutral territory after a decline to -15% over the same period – reversing the trend of Q4 2022-23 to Q2 2023-24. This emphasises the significant sectoral differences Norfolk continues to experience. After a rocky end to 2022, confidence of Norfolk business bounced back and has now stabilised. The percentage of manufacturers expecting to see their turnover increase over the next 12 months jumped from 25% in Q2 to 47% for Q3, though that confidence is flatter in our service sector, virtually unchanged this quarter at 27% from 26% last quarter. Things are also much more positive on profitability where confidence rises to 23%, up from 16% in manufacturing in Q2. This recovery in confidence in 2023 is yet to feed into increased business investment. The percentage of respondents reporting an increase to investment in plant/equipment has dropped notably from 40% in Q2 into negative territory, while 55% reported no change and 29% saw a decrease. Over the last six years the number of firms increasing investment has dropped as low as 9% nationally, at the start of the pandemic, but it has never gone higher than 28% (Q1 2018). The hospitality sector remains under additional pressure with 33% reporting a decrease in investment, and 22% an increase. This is particularly problematic for Norfolk where a high proportion of our business, particularly in coastal communities and market towns rely on tourism and hospitality. Inflationary pressures continue to ease but remain the top concern. The percentage of the county’s firms expecting their prices to rise fell for the fifth consecutive quarter. 36% now expect to put up prices in the next three months. This is down from an historic high of 65% nationally in Q2 of 2022, indicating inflationary pressures are continuing to ease. While inflation remains firms’ biggest concern, the level has dropped again after a slight rise last quarter, down to 67% of firms now worried compared to 79% in Q2. However there has been a corresponding 4 percentage point rise in businesses worried about interest rates nationwide, increasing from 41% in Q2 to 45% in Q3 across the country. Labour costs are now the number one cost pressure for businesses. Concerns around wage costs was the biggest pressure for most firms for the second quarter running, although the percentage of Norfolk businesses worried has dropped from 90% in Q2 to 68% in Q3. This mirrors the feedback we’ve received throughout the year. Worries about utility prices fell further from 70% to 59% across all sector, creating clear water with wage costs as the number one issue. But again there remain wide sectoral differences with manufacturers citing wages (68%), fuel (65%) and utilities (58%) in a close three-way race as main factors driving price increases. The UK-wide picture shows that in hospitality, 81% of firms were most worried about utility costs, with wages in second place at 74%. The retail sector was least worried about labour costs, with 52% citing it as an issue, against 59% flagging utilities and 58% raw materials. Jack Weaver, Chief Operating Officer at Norfolk Chambers of Commerce, said: “The results of the QES continue to point to tough trading conditions for many firms as inflation, labour shortages, global trade barriers, and interest rate rises continue to bite. “In Norfolk, manufacturers have reported a particularly tough quarter with stagnation in sales and orders, and some concerning downward trends in investment. It will be crucial over the coming months to see how this trend plays out. “Most firms continue to report problems with recruitment across all levels and skillsets. This mirrors the feedback we’ve had in our engagement sessions throughout the year and feeds through to the impact on the skills agenda and talent retention. “Easing inflation and a strong recovery of business confidence provide brighter spots, but these need to be reinforced with a clear plan from Government on long-term investment, direction from the Bank of England on the interest rate and increasingly, clarity from the opposition on their policy position towards business.” Responding to the findings, Director General of the British Chambers of Commerce, Shevaun Haviland, said:  “Our research shows that business confidence has stabilised at much healthier levels following a rocky end to 2022. But the economic warning lights are still flashing. “Firms are increasingly worried about interest rates, and while inflation concerns are falling, persistent wage pressures show we need a greater focus on relieving the UK’s tight labour market. “With manufacturing lagging behind services, and low rates of investment across the board, especially in the hospitality sector, it is clear more needs to be done to spur growth. “After the disappointment of HS2, firms want to see clear signals from Government to encourage investment. This means putting in place a five-year rolling guarantee on the full expensing tax allowance to give business some much needed certainty.”

On Tuesday 19^th September we held The Big Breakfast at Royal Norwich where we heard from our panel who covered topics discussed in our Focus Groups. Lots of great connections were made and some fascinating table discussions took place around phase 2 of the Norfolk & Suffolk LSIP. A BIG thanks to our panel, James Ingham (UPP), Harry Harris (Swarm Training), Gemma Crane (Mindset-HR), and James Howells (Turning Factor) for sharing their views and advice on some key issues such as workplace wellbeing, skills, and more. Thanks to Royal Norwich for providing a lovely full English breakfast and to our headline sponsors Turning Factor. View our video from the event here Jack Weaver, Chief Operating Officer: Businesses keep telling us that skills, recruitment and talent retention are major issues for them. The Big Breakfast gave us a brilliant opportunity to discuss these, our ongoing work on the Local Skills Improvement Plan (LSIP) and hear from industry leaders on what businesses can do to overcome those issues. We’ve had amazing feedback on the networking, roundtable discussions…not to mention the breakfast. All your insight will go straight into Phase 2 of our LSIP, and inform what we do next with our focus groups around the county. Dean Pierpoint, LSIP Project Manager: “It was great to see so many businesses attend The Big Breakfast to discuss skills and workforce development, a great networking buzz made for a very positive event for all involved.”

The BCC’s new Digital Revolution Challenge has held its first meeting to discuss ground-breaking research on how businesses are using Artificial Intelligence (AI). The survey, by the BCC’s Insight Unit – of more than 700 firms, mostly SMEs, found that:

• Almost half of all firms (48%) have no plans to use AI technology

• Customer facing businesses (B2C) are even less likely to use AI, with 58% stating they have no plans to use it

• One in four respondents (26%) think AI is going to lead to fewer jobs in their sector, with more B2B firms (29%) predicting a negative impact

Alongside the 48% that have no plans to use AI, the survey found a further 22% were not currently using it but planned to in the future. Businesses were also asked what types of AI they are currently using, with chatbots, such as ChatGPT, being the most popular application (18% of all respondents). Other technologies cited included:

• Machine learning data analysis (6%)
• Speech recognition (6%)
• Virtual agents for customer service (3%)
• Robotic process automation (3%)
• Natural language generation (3%)

• Deep learning or neural networks (1%)

The data also showed that companies with more than 50 employees were more likely to be currently investigating the use of AI in their operations than smaller ones, with 24% using chatbots, and only 37% stating they had no plans to use it at all. Why firms are, or are not, using AI Of the respondents who are currently using AI, common uses cited included coding, data analysis, language translation, content creation, and as a sounding board for ideas. By contrast, of the respondents who have no plans to use cited the following barriers: lack of relevance, investment cost, reliability, lack of understanding, and risks around scams or privacy. The research also found that 36% of businesses thought it was still too early to predict the impact of AI on jobs, while just one in 8 firms (12%) thought it would lead to an overall net increase in jobs in their sector. Responding to the implications of the data, Priya Guha, Chair of the BCC’s Digital Revolution Challenge, said: “With AI being considered so central to boosting the UK’s productivity this research on current levels of business engagement is an eye opener. “It is certainly a concern that almost half of firms say they do not plan to use AI either now or in the future. “But when we consider the economic conditions that businesses have been grappling with since the pandemic, it is no surprise that 51% of firms with fewer than 50 employees aren’t planning to use AI against 37% of larger businesses. “The BCC’s Digital Revolution Challenge is clear that the benefits to business from using AI are many. It will lead to efficiency gains, improved decision-making, better customer experiences, enhanced risk management and game-changing innovations. “It is essential for competitiveness in the modern business landscape, so we must make sure that every UK company is involved in this journey. “Our task now is to pull together a set of clear and pragmatic recommendations, for both Government and UK companies, to make this happen. “We have a position of responsibility here, and we must use our influence to improve awareness of the benefits of AI. “Improving clarity and certainty amongst businesses on AI will drive confidence to use it effectively. As it stands, it is alarming that a sizeable number of firms think it is irrelevant.”

The BCC is urging businesses who want to boost their exports and reduce costs to quickly embrace a new era of digital trade. 

It made the call as the Government’s flagship Electronic Trade Documents Act finally came into force today (September 20). 

William Bain, Head of Trade Policy at the BCC, said: 

“Campaigners, including the BCC, have worked for years to have the Electronic Trade Documents Act passed, and its introduction is a huge milestone. 

“This new era is starting in the UK, but we can also act as a beacon, leading towards further digitalisation of trade across the world. We now need to see other governments accelerating their work to digitalise border processes.   

“In our Trade Manifesto, we called on the UK Government to work with business to ensure 60% of the UK’s exports are carried out digitally by the end of the decade. 

“The whole Chamber Network has already risen to this challenge and has switched to using Digital Certificates of Origin for the UK.  

“As more countries make the transition, we will be able to increasingly digitize our trade – making it much less bureaucratic, and leading to big savings in both costs and time.” 

About The Act  

The Electronic Trade Documents Act gives legal status to electronic Bills of Exchange and Bills of Lading and other commercial documents.  

The new legislation gained Royal Assent on July 20 this year and came into force on September 20.  It provides opportunities to digitalise international trade documents and reap efficiency benefits. It also covers trade documents such as promissory notes, warehouse receipts, marine insurance policies, and cargo insurance certificates.   

Responding to the announcement of changes to several key Net Zero policies, Shevaun Haviland, Director General of the BCC, said: “If we are to meet the challenge of making the UK Net Zero by 2050 then we must have pragmatic goals, that business can be confident they will be supported to reach. “Companies want to address climate change but cannot plan for future investment if the sands keep shifting. “This means political consensus about the goals, combined with pragmatism on the solutions. Constant tinkering with Net Zero policies will only have further negative impacts on business confidence and investment plans. “Other countries and trading blocs are pouring billions into low-carbon technology, and we are getting left behind. “But if we get this right, and play to our country’s strengths then there is huge opportunity for UK Plc. It is vital we have a long-term Net Zero strategy which Government must demonstrate it can stick to.”

Information regarding our International Trade Documentation process: Documents sent to the International Trade team to be stamped are done on the day we receive them. Please be aware that due to current delays with the postal service, post may take longer to be delivered to us. If you have urgent documents that need to be stamped please send these to the below address using next day special delivery or by courier as we have been receiving these in a timely manner. The address to send your documents to is: Norfolk Chambers of Commerce, Hardwick House, 2 Agricultural Hall Plain, Norwich, NR1 3FS If you have any questions about our International Trade Service, please call them on 01603 625977

Reacting to the latest ONS trade data for July, William Bain, Head of Trade Policy at the BCC, said: 

“Removing the effects of inflation, goods export volumes grew at a decent pace in July, with a 4.4% month on month increase in sales to the EU.  

“But a key concern is the continued slowdown in momentum in UK services exports growth – which accounts for just under half of our overseas trade.   

“The BCC is recommending that an Exports Council is established by the UK Government to use ONS and other trade data to evaluate, review, and take action to improve UK export performance and strategy.  

“As the World Trade Organisation’s World Trade Report this week warned of the global economic consequences of moving away from open, free trade, we must redouble our efforts to open up markets for UK goods and services.”  

Detailed Analysis 

The data for July shows a 2.1% increase in UK goods export chained volumes (the measure which removes the effects of inflation) on the previous month, and a 0.4% rise in goods import chained values compared with June. 

Exports to the EU rose on both the current values and chained volumes measures (by 4.4%) with increases in fuels and machinery sales (including power generators). Exports to the rest of the world experienced downward pressures from fuels, machinery and transport equipment.   

Estimated UK services export performance remained at the same levels as in June – on both the chained volumes and current values measures. On services imports the picture was mostly static on both measures. On the chained volumes measure, UK services exports are still 2.9% lower now than in February 2020 at the time lockdowns were applied in many global regions.   

Trade Deficit 

Overall, there was a slight increase in the deficit for trade in goods and services by £1.2bn to £18.8bn in the three months to the end of July 2023.