- BCC’s Quarterly Economic Survey is the first economic indicator of the quarter, and is closely watched by the Bank of England and the Treasury
- Service sector export results at an all time high
- Employment rose in both sectors and is now at its highest level since 2007
- Business confidence in turnover and profitability are above pre-recession levels
- On the basis of these results, the BCC believes GDP growth in Q3 could be around 0.9-1.0%
The British Chambers of Commerce’s Quarterly Economic Survey (QES) released today (Tuesday) provides further evidence that the UK economy is healing. The Q3 survey, made up of responses from more than 7,400 businesses, shows improvements in many key areas for both manufacturing and services.
The Norfolk manufacturing sector, home sales and order strengthened, whilst their exports results showed a slight slow-down. The manufacturing export results are particularly surprising, as Norfolk Chamber’s level of export documentation hit an all time high last month, possibly indicating that the export drop relates mainly to European countries.
The service sector continued to go from strength to strength in both home sales and orders, as well as exports. Overall we are pleased that continued confidence of both sectors has helped fuel a temporary growth spurt, but it is too early to declare that the recovery is now secure – especially given risks both at home and abroad that still remain.
Norfolk’s key findings in the Q3 2013 Quarterly Economic Survey:
- Several key service sector balances are at all-time highs, but this could be due to a temporary spurt: home deliveries (+30%); export deliveries (+77%); employment (+17%); cashflow (+10%); turnover confidence (+51%) and operating at full capacity (+32%).
- Employment also rose in the manufacturing sector to +33%, and is at its best level since 2007.
- Business confidence in turnover and profitability remains positive . In both manufacturing (+48% and +24% respectively) and services (+51% and +36%) these figures are all above pre-recession levels.
- But there are some concerns. Investment in plant and machinery in the manufacturing sector fell, and is lower than in 2007, despite the full capacity balance being strong.
- Both export balances in the manufacturing sector (sales and orders) fell slightly but remain at historically high levels.
- Pressure to raise prices reduced in Q3. In manufacturing, this dropped 38 points to 0%, and in services, the balance dropped 9 points to +22%. Reduced raw material costs was given as one of the main factors in both sectors.
- Overall, the Q3 results support our view that the recovery is strengthening, but significant challenges remain.
Commenting on the results, Caroline Williams, Chief Executive of Norfolk Chamber said:
“We have long-championed the idea that Norfolk businesses have remained confident about their abilities to grow. Even more firms now believe they can increase their turnover and sales, and hire more staff, which is a testament to their hard-work, creativity and ambition.
“It is fantastic to see the service sector doing so well, with the results suggesting a recent growth spurt. The Manufacturing sector, despite a dip in their export results, is also showing signs of continued improvement. “Investment is still a concern, and if we are to have a high productivity, high skill, high wage economy then this needs to improve.
John Longworth, Director General of the BCC, said:
We have seen many false dawns in recent years and if we are to create the ‘land of opportunity for all’ that the Prime Minister spoke about only last week, we need swift delivery of promises made. This includes de-risking private investment in infrastructure to get diggers in the ground, which will help firms move their people and goods around the country in the long term. We still need more support for exporters through increased trade promotion, and better access to finance will also grease the wheels and enable high-growth businesses take the leap towards ‘going global’.
“The government mustn’t get distracted, and has to put growth first at all times. We will be looking ahead to the Autumn Statement in the hope that the Chancellor uses this opportunity to make a real difference and go all out in the name of growth. As we get closer to the General Election, political parties must not be drawn into politicking for cheap votes at the expense of clear, long-term policies that will help build a truly great economy.”
David Kern, Chief Economist at the BCC, said:
“It’s clear that the UK upturn is gathering momentum, with most key balances in this quarter higher than their pre-recession levels in 2007. On the basis of these results, GDP growth in Q3 could well be around 0.9-1.0%, with our full-year forecasts for 2013 and 2014 likely to be revised up further. However these strong results must not lull us into a false sense of security.
“Growth will continue, but it is likely to slow slightly following this recent spurt. External shocks from the US shutdown, possible debt default and tapering, and continued risks elsewhere in the world could all impact on our fragile recovery. At home, the impact of reducing the deficit, fixing the banking system, and the relentless squeeze on living standards will inevitably act as a constraint on growth in the next few years.
“All this means that it is vital to sustain the recovery and avoid setbacks. The MPC must continue its forward guidance on interest rates, and must work to bring inflation down without increasing its QE programme. On its part, the government must switch policy priorities towards measures to boost growth such as infrastructure investment, cutting business rates and taxes, promoting exports, and boosting the flow of lending to growing businesses through a fully-funded Business Bank.”
