The British Chambers of Commerce (BCC) has published the results of its Quarterly Economic Survey for Q4 2014 which shows manufacturing firms reporting strong domestic and export growth to end the year.
Shrugging off recent signs of a slowdown, the manufacturing sector recorded increases in the balances for domestic sales (+36%, up from +23% in Q3), export sales (+26%, up from +16% in Q3), recruitment intentions (+85%, up from +73% in Q3) and turnover confidence (+62%, up from +60% in Q3).
Director general of the BCC, John Longworth commented: “British businesses are well placed to grow in 2015 – a testament to their hard-work and resilience.
“It is particularly pleasing to see the manufacturing sector bounce back, despite signs of a slowdown in recent months. However we must aim for growth that is sustainable for the long-term, rather than settle for second best.
“With employment and investment intentions at historically high levels…it is now vitally important that firms are able to convert their growth ambitions into reality. Strengthening our business finance system, which constrains the growth aspirations of too many firms, will remain a decisive factor in securing a sustainable recovery. Low interest rates and reduced regulation will also go a long way to creating an environment that encourages enterprise and wealth creation.
“In spite of our survey showing an improvement in export balances, the UK’s lacklustre export performance and severely adverse current account balance, continue to act as drag anchors on GDP growth. This need not remain the case – lack of growth finance, patchy help on the ground in overseas markets, and a never-ending churn of short-term support schemes must be addressed without delay.
Other key findings from the survey, made up of responses from almost 7,000 businesses, include:
- An all-time high number of businesses have set out to recruit staff in the last three months,in both manufacturing (+36%, compared to +32% in Q3) and services (+32%, up from +28% in Q3).
- The balance of manufacturing firms operating at full capacity rose by one point to +41% in Q4.
- A record number of manufacturers invested in trainingin Q4 (+39%, up from +32% in Q3) and a historically high proportion invested in plant and machinery (+36%, up from +29% in Q3).
Longworth added: “The UK’s economic recovery still faces several obstacles, intensified by the uncertainty of the upcoming general election. Businesses are bouncing back, but their optimism may not last if political point scoring outweighs sound economic policies. It is imperative that all political parties use the forthcoming election campaign to outline their plans to support long-term business growth and investment.
David Kern, chief economist at the BCC said: “The latest results support our view that UK growth will stabilise well above 2%, and that Britain’s medium-term economic growth will be slightly higher in the next few years than the recent OBR forecast predicted.
“However, many balances remain below the high levels seen earlier this year, indicating that the overall pace of GDP expansion is easing. In the face of weak eurozone growth and domestic policies aimed at stabilising our public finances, a slowdown in economic growth may yet occur in 2015 and 2016, despite increased strength and optimism from businesses.
“Despite a slight improvement at the end of 2014, the current account deficit is unacceptably large. The UK needs a long-term push to rebalance the economy towards net exports and investment, rather than relying too heavily on consumer spending to keep growth going. With inflation
likely to stay around 1% for much of the next year, the MPC must delay interest rate rises for the time being.”
Head of manufacturing at BDO LLP, Tom Lawton noted: “There is conflicting data out there so this is no time for complacency. Government should view this as an opportunity to get behind manufacturing and do everything it can to build momentum by encouraging investment and employment in the sector and by enhancing the support provided to companies that export or are looking to export. This is particularly important now given the signs that the UK’s dominant service sector is faltering, highlighting the need to bring more balance to the country’s economy.”