BCC Quarterly Economic Survey: service sector exports at new all time high
• BCC’s Quarterly Economic Survey is the first major economic survey of the quarter, and is closely watched by the Bank of England and the Treasury
• Published during Export Week, the survey shows that exports in the services sector (sales and orders) rose to an all-time high
• Positive Q1 survey suggests that growth will remain strong in the short-term
• Six Q1 key manufacturing balances are at all time highs
The British Chambers of Commerce’s (BCC) Q1 Quarterly Economic Survey published today provides further evidence that the UK economy is continuing to grow. Published during Export Week, the results show that both export orders and sales in services are at new all time highs, and many key manufacturing balances are also at record levels, showing that growth is strengthening in the short-term.
However, the BCC believes that the recovery must become more balanced in the months ahead as it is still too reliant on consumer spending. Access to finance remains a critical issue for businesses as they look to expand and meet growing order books, and rectifying this is vital if we are to transform our economy from being merely good, to being truly great.
Key findings in the Q1 2014 Quarterly Economic Survey:
• For both manufacturing and services, all the major Q1 balances are stronger than their long-term averages, and most are higher than their 2007 pre-recession levels.
• Both export balances in the services sector rose in Q1, surpassing their Q4 all-time highs: export sales (+38%) and export orders (+39%).
• Six key manufacturing balances are at all-time highs. This continues a trend seen over the last three quarters where an initial spurt in manufacturing has developed into consistent growth: domestic sales (+38%), domestic orders (+42%), employment expectations (+40%), investment in plant and machinery (+37%), investment in training (+33%), and turnover confidence (+67%).
• Almost all the key balances in the services sector remain above their 2007 pre-recession levels. • But some concerns still exist. There was a significant drop in the employment balance in the services sector (down 13 to +16%).
• While recent falls in inflation have dampened the concerns of firms, it remains the biggest concern for both manufacturers and service-based companies.
Commenting on the results, John Longworth, Director General of the BCC said:
“It is great to see another positive story as we enter the 25th year of our survey. Confidence is high and our members are determined to continue driving the recovery. We are brilliant at services and very successful at exporting our knowledge-based industries all over the world. This includes everything from accountancy and marketing through to literature and the IT sector.
“In addition, our dynamic, high-value manufacturing sector is once again confounding expectations, and going from strength to strength. But UK firms are ambitious, and more support is needed if we are to place the recovery on a sustainable, broader footing in the medium-term.
“We have witnessed many false dawns during the recovery, and external shocks still loom on the horizon. Given that over the next year or so we face political change at home and abroad, long-term policies that support our businesses as they look to grow and invest are crucial.
“Access to finance and export support also remain vital if we are to secure a truly great economic recovery. Only by repairing our broken business finance system will viable, growing firms gain access to the capital that will allow them to invest in their staff and machinery, and enter new markets. And despite recent falls, inflation remains a key concern for our businesses, and the Bank of England must strive to maintain an investment-friendly environment, with clarity on forward interest rates and action to keep inflation low.”
David Kern, Chief Economist at the BCC said:
“The results of our survey suggest that growth is strengthening in the short-term, and support our recent forecasts that the economic recovery is moving at a solid pace. But challenges persist and despite this progress, the recovery is not yet secure.
“UK growth is still reliant on consumer spending, driven by a resurgent housing market and a declining savings ratio. Given that UK personal debt levels are too high and need to fall, it will be hard to maintain growth levels in the medium-term without significant structural changes to our economy. Our current account deficit is the largest in the G7 and will pose long-term risks unless it is tackled. Investment and exports must play a larger contribution to our economic future, or else there is a risk that our recovery could stall.
“Businesses need a stable environment to plan ahead and invest. So while this period of low inflation and low interest rates cannot last forever, every effort must be made to sustain it for as long as possible.”