BCC: UK upturn slowly strengthening
British Chambers of Commerce (BCC) data released today show that the UK economy has made further progress, but that there are still risks at home and abroad that could derail the recovery.
The quarterly survey, made up of responses from over 7,400 businesses, shows that most key balances strengthened in Q2 2013 compared with the previous three months.
Export balances remained strong, employment balances rose and the findings suggest that the economy will continue to strengthen gradually over the next year, with growth slowly improving.
Key findings are as follows:
- For both manufacturing and services, most key domestic balances are stronger in Q2 than in Q1, but in both sectors they remain below pre-recession levels seen in 2007.
- Export balances remain strong: service deliveries rose three points to +36% (the highest since the survey started in 1989) while orders rose three points to +29% (the highest since 1994).
- Employment balances rose in Q2, following their Q1 decline. In manufacturing, the balance improved from +11% in Q1 to +19% in Q2; in services, it improved from +6% to +15%.
- Business confidence has again increased, and is much stronger than average levels during the recession. Manufacturing confidence that turnover will improve rose seven points to +51%; service sector confidence rose six points to +46%. Profitability confidence rose from +33% to +39% for manufacturing, and from +22% to +34% in services.
- The investment picture however was mixed. While the balance of manufacturing firms looking to increase investment in plant and machinery rose nine points to +23%, for services it fell two points to +7%.
- Pressure to raise prices continued to ease in Q2. In manufacturing, this fell by five points to +12%, with many citing reduced pressures from raw materials. For services, the balance fell by seven points to +12%, low by historical standards.
- Cashflow balances are weak in both sectors. While manufacturing increased two points to +4%, the services sector recorded a five point drop and now sits at +1%. For services this remains 20 points below its 1997 peak.
- Overall, the Q2 results support our view that the economy will gradually strengthen over the next year, but challenges remain.
BCC chief economist, David Kern, comments: “The improvement in most key balances in our Q2 survey supports our view that the UK upturn is slowly strengthening. The recent revisions to historic GDP data show that previous fears of a double dip were misguided.
“If recent progress is sustained, we could even see quarterly GDP growth of 0.6% in Q2 2013. The remarkable export balances show that the service sector is capable of increasing its trade surplus over time and can work to reduce our overall trade deficit.
“Developing the export potential of this sector is critical to long-term prosperity.”