The British Chambers
of Commerce’s Quarterly Economic Survey– now in
its thirtieth year as the largest UK private sector survey of business
sentiment and a leading indicator of UK GDP growth – found that UK
economic conditions weakened in the third quarter amid a significant
deterioration in manufacturing sector activity.
- The balance of manufacturers
reporting increased export orders lowest in a decade and domestic sales
lowest since 2011.
- The balance of manufacturers
reporting improved cashflow drops to eight-year low.
The latest results
of the survey of 6,600 UK firms that employ roughly 1.2 million people, point
to an economy sagging under the weight of relentless uncertainty, another
looming Brexit deadline, and deteriorating global economic conditions amid
heightened trade tensions.
In the manufacturing
sector, there was a marked downward shift in many indicators in the third
quarter. The balance of firms reporting increased domestic sales was at its
weakest since Q4 2011 and domestic orders entered negative territory for the
first time in seven years– indicating more businesses saw a decrease than
increase. The balance of firms reporting increased export sales dropped to its
lowest level since Q4 2015 and the balance for export orders went negative and
stood at its lowest level since Q3 2009.
The balance of firms
in the manufacturing sector that increased investment in training dipped to its
lowest level since Q1 2010. Indicators for business confidence in turnover and
profitability among manufacturers dropped to an eight-year low.
The dominant
services sector saw a decrease in the balance of firms reporting increased
domestic sales and orders, and export orders. The balance of firms confident in
turnover and profitability improvements also fell in the quarter, as did the
balance for investment in training.
Manufacturers
reported that their cashflow position – a key indicator of the financial health
of a business – has deteriorated. In the services sector, cashflow held steady,
but remains low by historical standards.
Responding to the
alarming findings, the BCC is imploring Westminster to take urgent action. In
the coming weeks, both government and parliament must do everything in their
power to avoid a messy and disorderly Brexit, while at the same time taking
bold action to incentivise investment and to cut the high up-front cost of
doing business in the UK. In an unwanted no-deal scenario, additional targeted
measures will need to be taken by government to support businesses through
unprecedented times of turbulence and change.
Suren Thiru, Head of
Economics at the British Chambers of Commerce (BCC), said: “Our findings point
to a worrying drop-off in UK economic activity, with unrelenting uncertainty
over Brexit and a notable slowing in global growth prospects dragging down almost
all the key indicators in the quarter.
“The manufacturing
sector continues to toil under the weight of diminishing cashflow, weakening
global demand and disrupted supply chains, and the data indicates that the
sector was a drag on UK GDP growth in the quarter. Although the slowdown in a
number of the key service sector indicators was relatively modest, slowing
activity in the sector is a concern given its dominant share of overall UK
economic output. A stuttering services sector coupled with a worrying downturn
in manufacturing activity indicates that any bounce back in UK GDP growth from
the contraction in the second quarter is likely to be underwhelming at best.
“Looking forward,
weakening orders, confidence and investment intentions suggest that unless
action is taken the UK’s current weak growth trajectory could drift markedly
lower over the near term.”
Reacting to the
results, Dr Adam Marshall, Director General of the British Chambers of
Commerce, said:
“This is a reality
check, not scaremongering or politicking. These are some of the worst figures
we’ve seen in a decade – and jobs, businesses, and the future success of our
communities are on the line.
“Behind each and
every one of these statistics sit thousands of real businesses, who are feeling
the cold harsh winds of Brexit uncertainty and global trade turbulence right
now.
“We need to see
immediate action to avoid a messy and disorderly Brexit on October 31st, alongside bold measures to stimulate
investment and confidence across the UK. The government must also make urgent
preparations to support business cashflow, where the strains of acute
uncertainty are hitting businesses, and particularly manufacturers, hard.”
Key findings in the
Q3 2019 survey for manufacturing sector:
- The balance of firms
reporting increased domestic sales fell from +10 in Q2 2019, to 0 and
those reporting increased domestic orders fell from +4 to -7. Both are at
their lowest level since Q4 2011.
- The balance of firms
reporting improved export sales fell from +10 to +3, the weakest since Q4
2015 and the balance of firms reporting increased export orders dropped
from +4 to -3 – the weakest since Q3 2009.
- The balance of firms
reporting improved cashflow fell in to negative territory from +2 to -7 –
the weakest outturn since Q32011.
- The balance of firms
increasing investment in plant/machinery fell in the quarter from +11 to
+7 remaining historically weak, and investment in training fell from +14
to +8, lowest since Q1 2010.
- The balance of firms
confident that turnover and profitability will increase in the next 12
months fell from +38 to +25 for turnover and from +24 to +11 for
profitability – lowest since Q4 2011.
