London – The British Chambers of Commerce (BCC) has reported an improved short-term performance in the manufacturing sector set against a further slowdown in growth in the services sector, in its latest Quarterly Economic Survey.
The study based on more than 7,000 responses from firms in the third quarter of 2016, and the first covering the period after the European Union referendum, showed that manufacturers enjoyed improved domestic and export sales compared with the previous quarter, with some benefitting from sterling's recent fall.
Meanwhile, the balance of service sector firms reporting improved domestic and export sales was at the lowest level seen since 2012.
The survey's results suggested that the UK economy is still growing - albeit at a lower level than before the referendum - and supports the BCC's forecast for growth of 1 percent in 2017.
The survey also concluded that near-term uncertainty following the vote to leave the European Union has led 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 findings in the survey included:
Overall, the figures for both the 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 +17, from +9 in Q2 2016.
Domestically, the balance of manufacturers reporting increased sales rose to +13 from +9, although those reporting increased advance orders fell slightly, to +7 from +9
In the last three months, the balance of manufacturers hiring more staff rose three points to +15 from +12, although in the services sector the number fell five points to +14 from +19
Fewer firms in both sectors are reporting that they are confident that their turnover and profitability will improve in the next year, although both remain positive
Firms in both sectors have reported that the exchange rate is a greater concern to their business than three months ago, with 30 percent of services businesses (up from 15 percent) and 48% of manufacturers (up from 35 percent).
BCC acting director general Adam Marshall, said: “While many manufacturers have seen something of a bounce this summer, the UK'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, our survey does show that growth has slowed further since the EU referendum. 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.”
(Image source: SMMT)