|QUARTERLY ECONOMIC SURVEY: BUSINESS CONFIDENT BUT GROWTH WEAK
January 8 2013.
- BCC's Quarterly Economic Survey for Q4 2012 shows progress, with almost all major balances improving since Q3.
- British businesses are ambitious, and confident the economic outlook will improve in 2013
- Although they are stronger, many key balances are still low by historical standards, indicating that growth remains weak.
The latest Quarterly Economic Survey released today (Tuesday) by the British Chambers of Commerce (BCC) shows that the economy improved in the fourth quarter of 2012, with stronger balances seen in both the manufacturing and service sectors. The new survey, made up of nearly 8,000 business responses, shows that UK firms are confident and ambitious, but also indicates that growth remains weak and there are still economic challenges ahead.
Commenting on the results, John Longworth, BCC's Director General, urged the government to take bold and imaginative measures to boost growth that will help businesses of all sizes to deliver a lasting recovery throughout 2013 and beyond.
The results show the following:
- Balances for both manufacturing and services improved in Q4 compared with Q3.
- For both sectors, domestic balances are lower than their long-term averages and well below their pre-recession levels in 2007.
- Service export balances are now higher than their average pre-recession levels in 2007 (deliveries are at +24% and orders are at +18%), but manufacturing export balances are still weak (deliveries are at +13% and orders are at +11%).
- Business confidence rose significantly in Q4 compared to previous quarters, but it is still weak by historical standards, particularly in services.
- Business investment strengthened in Q4 but is still relatively weak. Manufacturing investment in plant and machinery increased by four points to +11% and is up six points to +20% in training. Service investment rose by two points to +5% in plant and machinery, and by four points to +14% in training.
- Cashflow balances, though higher, are weak overall, and the service sector's is still negative at -1%.
- Plans to raise prices have increased, particularly in the manufacturing industry.
- Inflation remains a major concern for businesses in both manufacturing and services.
Commenting on the results, John Longworth, Director General of the BCC, said: "Our survey results show that the economy is making progress, despite the numerous challenges it has faced. Although the improvements we have seen are slight, it is progress nonetheless, and highlights the determination and ability of the businesses we have here in the UK. Despite rising business confidence that the outlook will improve, it is clear that economic growth remains weak and that nurturing it must be a top priority.
"The UK economy will continue to face major obstacles as we head into 2013, and every effort must be made to kick-start growth. Politicians can make a difference to our economic success, as they have the power to deliver bold and imaginative measures that will drive growth. The question is whether they have the guts to do it.
"It is a new year and the time for a new chapter in our economy. The government must build on measures announced in the Autumn Statement and deliver a strategy that combines deficit reduction with a realistic long-term growth plan, including immediate measures to support business confidence.
"Recent steps to improve access to finance, such as the commitment to create a business bank, must be implemented at scale and with clear timetables. More forceful measures are also needed to unlock massive private funding to renew Britain's infrastructure that will create confidence in the short-term, jobs in the medium-term and growth in the long-term. But this will only work once we free up the planning system at national and local levels, and defeat the culture of NIMBYism that prevents many business projects getting off the ground."
David Kern, BCC Chief Economist, added: "These results show welcome progress compared with the third quarter, but many balances are still weak by historical standards. For both manufacturing and services, almost all the key balances are stronger than in Q3, but domestic balances remain well below their pre-recession levels in 2007. The marked increase in confidence in both sectors reinforces our view that the economy will record modest positive growth in Q4 2012. Fears that the economy returned to negative growth in Q4 2012 are not supported by our survey. Plans to raise prices are higher, notably in manufacturing, but it is questionable whether price hikes can be carried out in the face of weak demand.
"We expect modest GDP recovery in 2013 and 2014, but it is clear that UK growth remains inadequate and must be boosted further. The economic environment will remain challenging, both globally and in the UK, with a prolonged period of below-trend growth. But British businesses remain resilient and we are confident that, with the right policies, growth will gradually improve over the next few years."