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Quarterly Economic Survey: Subdued growth in Q2 amid challenging business conditions
The British Chambers of Commerce (BCC) today (Thursday) publishes its Quarterly Economic Survey – the UK’s largest and most authoritative private-sector business survey. Based on the responses of over 7,700 businesses in Q2 2017, the results for both sectors indicate that the UK economy grew at a subdued rate in the second quarter of 2017.
The Norfolk services sector, a key driver of economic growth, saw indicators of domestic activity, employment and investment continue to weaken slightly in the quarter. Consumer-facing industries such as retail outlets and hotels reported weaker growth rates compared to B2B businesses in the quarter.
The survey shows Norfolk export sales and orders in the manufacturing sector falling from the previous quarter. Whilst services sector exports remained a mixed picture, with export sales increasing marginally but export orders falling by 4 points.
The balance of Norfolk firms expecting prices to rise has decreased across both sectors, but the percentage of firms reporting concern over raw material costs and pay settlements has risen.
The findings indicate that while confidence in future turnover decreased, the effect could be short-term, as confidence in overall profitability improved. Both sectors showed an increase of investment in training.
Key Norfolk findings in the Q2 2017 survey:
- Overall, the figures for both sectors indicate static growth
- The percentage balance of manufacturing firms expecting the price of their goods to increase over the next three months has fallen slightly from the near-historic-highs reported in the previous quarter (from +55 to +33), and fell in services from +39 to +29
- However, manufacturers report continued pressure from the price of raw materials, with +82 reporting this as the cause of price increases (up from +68). Pressure from pay settlements also rose in both, rising from +20 to +27 in manufacturing and +21 to +49 in services
- In the manufacturing sector, the balance of firms reporting increasing domestic sales rose slightly from +9 to +12, as did domestic orders from +6 to +10. The balance reporting export sales fell from +17 to +11 and export orders fell from +20 to +7
- In services, the balance of firms reporting increasing domestic sales remained static and domestic orders fell from +13 to +8. The balance reporting increasing export sales rose from +6 to +13 but export orders fell from +4 to 0
- The percentage of businesses in the manufacturing sector attempting to recruit fell somewhat but remain relatively high at 68%. Whilst the service sector increase slightly to 65% (up from 60%). Of those, the percentage of firms facing recruitment difficulties dropped but remains high in both sectors at 63% (down from 83%) in manufacturing and 67% in services (down from 81%)
- Confidence across the board dipped in the second quarter. The balance of manufacturers confident that turnover would improve over the next 12 months fell from +35 to +23, and the balance for services from +42 to +31. The balance of manufacturing firms confident that profitability would increase remained static but in services rose slightly from +19 to +21
- However, the balance of firms in both sectors reporting improved cashflow remains at historical lows, with manufacturing continuing to fall into negative territory from +2 to -15, whilst in services it rose from -6 to 0.
Commenting on the results, Chris Sargisson, Chief Executive of Norfolk Chamber said:
“The latest survey results, which reflect the outlook of companies in all sectors and locations across Norfolk, indicate that for many businesses growth is static at best, and at worst, beginning to slow.
“It's time for the economy to be put back at the heart of the agenda, with a focus on creating the best possible environment for business growth all across the county. Government must play its part by tackling the issues that hold businesses back, including labour shortages, weaknesses in our physical and digital infrastructure, and high upfront costs which dampen investment intentions and firms' growth potential. Any talk of higher business taxes to pay for politically-motivated spending must be quashed swiftly, to avoid undermining business confidence further.
"The subdued growth picture also underlines the importance of getting as much clarity on the Brexit transition as possible, as quickly as possible over the coming months."
Nova Fairbank, Public Affairs Manager for Norfolk Chamber, said:
“The latest survey indicates that Norfolk’s economic activity remains subdued in the second quarter of 2017.
“The services sector activity stuttered a little with a number of the key balances weakening this quarter. Consumer-focused industries were the worst performers - further evidence that rising inflation is dampening their activity. Norfolk’s manufacturing results saw a definite slow-down and the longer-term trends suggests that the manufacturing sector’s contribution to overall growth will not be enough to offset weaknesses elsewhere.
“Rising inflation remains the key challenge for the Norfolk economy this year. Consumer prices are likely to keep rising in the coming months as the recent sizeable increases in the cost of raw materials, pay settlements and other overheads filter through supply chains.”