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Chamber Quarterly Economic Survey: Mixed picture emerges post-referendum
The British Chambers of Commerce (BCC) Quarterly Economic Survey – Britain’s largest and most authoritative private sector business survey, based on more than 7,000 responses from firms in Q3 2016 – shows a mixed picture, with an improved short-term performance in the manufacturing sector set against a further slowdown in growth in the services sector.
The survey – the first covering the period after the EU referendum – shows that Norfolk manufacturers enjoyed improved domestic and export sales compared with the previous quarter, with many benefitting from sterling's recent fall. Meanwhile, the balance of Norfolk’s service sector firms reporting improved domestic and export sales was at a low level with export balances falling into negative territory.
The survey's results suggest that the Norfolk and UK economy is still growing - albeit at a lower level than before the referendum - and supports the BCC's forecast for growth of 1% in 2017.
The survey suggests that near-term uncertainty following the vote to leave the European Union has led Norfolk businesses to lower their expectations for hiring, turnover, and investment in plant, machinery, and training.
Given this mixed picture, and muted business investment intentions, the BCC is urging the government to use next month's Autumn Statement to boost business confidence - by giving the green light to key infrastructure projects, and by introducing measures that 'crowd in' business investment and job creation.
Key Norfolk findings in the Q3 2016 survey:
- Overall, the figures for both the Norfolk manufacturing and services firms indicate growth, but at a slower pace than before the referendum
- In the manufacturing sector, the balance of firms reporting improved export sales rose to +13, from -11 in Q2 2016.
- The balance of Norfolk firms reporting an increase in advance export orders is +13, up from 0. One factor may be the fall in sterling, which has made some UK manufacturers more competitive.
- Domestically, the balance of Norfolk manufacturers reporting increased sales increased dramatically from to +7 from -15, although those reporting increased advance orders fell somewhat, to +0 from +19
- In the last three months, the balance of manufacturers hiring more staff rose thirty two points to +0 from +32, although in the services sector the number fell seven points to +9 from +16
- Fewer firms in both sectors expect to take on staff in the next quarter. For services the balance for firms (+18, down 5) is the lowest since Q2 2013
- In the services sector, many balances saw a decrease on the previous quarter
- The balance of Norfolk services firms reporting improved domestic sales fell sharply to +10 from +21, while the advance orders balance fell from +19 to +0 – indicating a significant slowing of growth. This was reflected in the results for the East of England and nationally
- On services exports, the balance of firms reporting improved sales remained in negative territory and fell from -9 in Q2 to -12 in Q3 2016, while the balance of firms reporting an increase in advance orders fell further, from -9 to -14
- Norfolk’s manufacturers gained considerable confidence in both their expected turnover and profitability. However those in the Norfolk service sector reported that their confidence in those areas was waining.
- Norfolk firms in both sectors have reported that the exchange rate is a greater concern to their business than three months ago, with 38% of services businesses (up from 12%) and 68% of manufacturers (up from 19%).
Commenting, Caroline Williams, Chief Executive of Norfolk Chamber said:
“While many Norfolk manufacturers have seen something of a bounce this summer, Norfolk’s services sector has slowed significantly, and our data suggests that slower growth is likely in the months ahead.
"Although it is important not to take one quarter’s figures in isolation, the BCC survey does show that growth in Norfolk has slowed further since the EU referendum. However I am confident that businesses in Norfolk are resilient and innovative. They will continue to strive towards delivering greater economic growth and jobs for our region.”
Also commencing on the results, Dr Adam Marshall, Acting Director General of the British Chambers of Commerce, said:
“Boosting business must be a key task for government in the months ahead, particularly as forward confidence on turnover and profitability has flagged for firms across the UK.
"The Prime Minister has given businesses some clarity on the timetable for Article 50, and on short-term regulatory and legal issues. This is helpful, but needs to be followed up by a firm demonstration that the government has a clear and coherent strategy to defend the UK’s economic and business interests in the negotiations that lie ahead.
“Firms are concerned over investment, hiring, and profitability. The Chancellor's Autumn Statement is a crucial opportunity to incentivise business investment and overseas trade. Final and irrevocable decisions on infrastructure projects, both big and small, would also boost business confidence and support investment all across the UK."