The latest results
of the British Chambers of Commerce Quarterly Economic Survey Q4 2019 survey –
which is the largest of its kind in the UK and a leading indicator of GDP
growth - found protracted weakness across most indicators of economic health in
the final quarter of 2019.
The service sector,
which accounts for almost 80% of UK economic output, saw all its key indicators
worsen compared to Q3 2019. These indicators remain well below their historic
average. Fewer service sector firms reported in the quarter.
The balance of
manufacturers reporting a rise in domestic and export sales improved slightly.
However, the balance of manufacturers reporting increased export and domestic
orders has now been negative for two consecutive quarters. This is the first
this has happened since 2009 and 2011 respectively.
Investment
intentions remain weak by historic standards – the balance of firms in the
manufacturing sector that plan to increase investment in plant and machinery
dropped to its lowest level since Q4 2011.
Cashflow – a key
indicator of the health of businesses –improved slightly from its lowest level
in eight years, but remains very weak across both manufacturing and service
sectors.
Suren Thiru, Head of
Economics at the British Chambers of Commerce (BCC), said: “The UK economy
limped through the final quarter of 2019.
“The fourth quarter
was characterised by a broad-based slowdown in the dominant services sector
with all key indicators weakening in the quarter, amid sluggish household
expenditure and crippling cost pressures.
“Despite some
improvements, indicators in the manufacturing sector remain very weak by
historic standards, and with indicators for domestic and export orders
continuing to contract, the near-term outlook for the sector remains
challenging.
“A faltering service
sector together with listless manufacturing activity points to a downbeat
outturn for UK GDP growth in the fourth quarter of 2019”.
Responding to the
findings, Dr Adam Marshall, Director General of the British Chambers of
Commerce, said it was clear that the end of political deadlock at Westminster
must also bring action to renew business confidence and tackle the prolonged
stagnation that’s affecting so much of the UK economy.
"The government
must use its newfound majority to take big decisions to stimulate growth,"
he continued.
“If ministers take
action to reduce up-front costs, move key infrastructure projects forward, and
to help businesses on training, they’ll be rewarded with increased investment.
“However, they also
must move quickly over the coming weeks to ensure that Brexit is done right. A
clear future trading relationship with the EU is also crucial to many firms’
future investment and growth prospects.”
Key findings in the
Q4 2019 survey for the manufacturing sector:
- The balance of firms
reporting increased domestic sales rose from 0 in Q3 2019, to +4
- While those reporting
increased domestic orders rose from -7 to -1, it’s the first time since Q4
2011 that this indicator has been negative for two consecutive quarters
- The balance of firms
reporting improved export sales rose from +3 to +4
- The balance of firms
reporting increased export orders was unchanged at -3 – the first time
since Q3 2009 that this indicator has been negative for two consecutive
quarters
- The balance of firms
reporting improved cashflow rose from -7 to +1
- The balance of firms
increasing investment in plant/machinery fell in the quarter from +7 to +5
the lowest since Q4 2011, and investment in training rose from +8 to +11
- The balance of firms
confident that turnover and profitability will increase in the next 12
months rose from +25 to +27 for turnover and from +11 to +12 for
profitability. This is still much lower than the post-recession average.
