Chamber: Positive economic growth but manufacturing exports slump
- The BCC's economic survey for Q4 2015 signals slower economic growth in the short term.
- Most key balances for both manufacturing and services are down on the previous quarter
- Manufacturing export sales balances fall to levels approaching stagnation in Q4 – the lowest since 2009
The British Chambers of Commerce (BCC) Quarterly Economic Survey – Britain’s largest and most authoritative private sector business survey, based on almost 7,500 responses from firms – shows that most key manufacturing and services balances were weaker this quarter, but manufacturing firms fared far worse. This has led Britain’s two-tier growth trend to become further entrenched.
Most key balances for the Norfolk services sector dipped slightly again on the previous quarter, with domestic sales continuing to be the main contributor to overall growth. The sector however continues to remain resilient in the face of global headwinds. However the Norfolk manufacturing sector continues to struggle. Domestic and export sales and order balances have now fallen well below their pre-recession levels in 2007, suggesting that the sector is close to stagnation.
Key Norfolk findings in the Q4 2015 Quarterly Economic Survey:
- Overall, the results suggest positive economic growth over the next year, albeit at a slower pace, but built mainly off the back of the services sector. The UK recovery continues to face many global challenges
- Most key balances were weaker in Q4 than in Q3 for both the manufacturing and services sectors; the falls in services are in general smaller than the declines in manufacturing
- Norfolk export manufacturing balances declined sharply to levels approaching stagnation – export sales declined three points to -3%, the lowest level since Q3 2009 – while export orders also fell drastically to -8%
- The Norfolk services sector export sales balance, whilst still in negative territory, rose from -4% to -3%
- Norfolk’s domestic balances were stronger than export balances, despite falling. Norfolk manufacturing sales balance fell fourteen points to -8%, while domestic orders were down three points to -5%. In services, domestic sales balance fell three points to +26%, with orders dropping ten points to +11%
- Intentions to increase prices rose in manufacturing, from +21% in Q3 to +23% in Q4. In services however, this fell by two points to +22%
- Both sectors report increased pressures for higher pay settlements. Norfolk manufacturers in particular recorded a marked increase from +15% in Q3 to +30% in Q4.
Caroline Williams, Chief Executive, Norfolk Chamber said:
“2015 has been a tough year for the manufacturing sector, who have found it challenging in terms of UK and export sales. Although, the service sector continued to produce robust figures throughout the year, they too finished with lower results than at the start of the year.
However Norfolk is still a great place to be in business. It is important that the Norfolk business community holds its nerve during these challenging times to retain the confidence in both their customers and their staff. The Norfolk economy is mixed with some business doing really well, as our export documentation department’s activity confirms. Accessing global markets can expand opportunities for both service and manufacturing businesses can create great opportunities.
As we all know it is our people who really make a difference in our businesses so at the start of the New Year it is important that we do all we can to both retain and develop our staff. It is their innovation and new ideas which will help move the business forward and if it can include developing Norfolk’s younger people so much the better.
Finally it is important to get out there and network. Find out what your competitors are doing, what your customers are looking for, what new opportunities are out there for your business, and what support is available. It is often the case that another business person has the answer to your challenge so do take time to get out and about”
John Longworth, Director General of the British Chambers of Commerce, said:
“While these latest figures demonstrate growth, it is clear that there are warning signs of potential trouble ahead. The declines across the board should send a message to government that UK firms are in desperate need of a favourable business environment, not more administrative burdens.
“It is not enough to rely upon consumer spending and the housing market to grow the economy, nor to rely purely on services to drive export growth. We need a rebalanced economy if we are to continue punching above our weight on the global stage. The quality and variety of our goods and services is what gives Brand Britain its strength overseas.
“The vast windfall from the OBR in the Autumn Statement led to revised forecasts based on improving tax receipts. However businesses can’t focus on growing amid a storm of red tape and tax compliance burdens. In addition, government policy has created overwhelming pressure to increase pay settlements, despite downward pressure on wages created by continued migration to the UK. Businesses are finding themselves chafed and stagnating.
“The real concern is that this period of two-tier growth becomes the norm rather than a blip. This requires the government to make 2016 a year of action, on infrastructure, skills, and access to non-equity finance for firms. Otherwise the UK economy could suffer negative consequences in the face of increasing global uncertainty.”
David Kern, Chief Economist at the British Chambers of Commerce, added:
“Coming after relatively weak figures in our Q3 survey, the falling balances in Q4 highlight the risk that the pace of growth may slow further. The results also underscore the serious obstacles that the UK will face when trying to rebalance the economy towards net exports. While worsening global circumstances are the main impediment, we are not doing enough closer to home to encourage businesses to trade overseas.
“The sharp decline in export manufacturing balances, to levels approaching stagnation, is particularly disturbing. Slowing growth in international markets is causing these firms to become pessimistic about their short-term prospects.
“Though our vibrant and resilient services sector will remain the main UK growth driver, the Q4 results indicate that it is also losing some of its momentum. But the challenges facing manufacturing are much more serious.
“While we must not forget the strengths of the UK economy - with higher growth than in most G7 economies and with a dynamic and flexible labour market - the recovery is still fragile. Given the global uncertainties, it is important to avoid unnecessary risks. Though wage pressures are rising, inflation is likely to remain below target over the next 18 months, and the MPC should keep interest rates at their current low levels for the time being.”