• BCC Quarterly Economic Survey Q3 2019: Economic conditions weaken as manufacturing slump continues

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    October 04, 2019
    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. 
     
    Dan Fell, Chief Executive at Doncaster Chamber, said: 
     
    “It is clear that the uncertainty of Brexit is undermining confidence locally and nationally.  The Chamber represents remainers and leavers alike, businesses that stand to prosper and others that feel they will have significant challenges as a results of the UK’s exit from the EU.  Where those businesses are largely united, is in the desire to avoid a messy and disorderly no deal exit and in their need to be adequately prepared, be it to mitigate risks or to maximise opportunities alike.  Businesses and can only be adequately prepared when Government is adequately prepared and, presently, we are a long way from that situation.

    “Doncaster has the fourth largest growing economy in the UK, the fastest growing airport outside of London, and has delivered a significant number of game changing projects this last decade.  Despite this, the borough remains susceptible to significant economic shocks.  We therefore urge national politicians to be mindful of the comparative fragility of economies such as Doncaster in the coming weeks as they work to secure a Brexit deal and encourage an approach that values expertise and pragmatism over ideology.  Additionally, it is imperative that, locally, all partners maintain an emphasis on making Doncaster as enterprising and business friendly as possible to ensure that Doncaster’s private sector continues to thrive and deliver growth and jobs for our communities.”
     
     
    Key findings in the Q3 national 2019 survey:  
     
    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 into negative territory from +2 to -7 – the weakest outturn since Q3 2011.
    • 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.
     
    Services sector:
    • The balance of firms reporting increased domestic sales fell from +17 in Q2 2019 to +15. Those reporting increased domestic orders fell slightly from +10 to +9
    • The balance of firms reporting improved export sales remained steady at +6. Those reporting increased export orders fell from +5 to +1.
    • The balance of firms reporting improved cashflow held steady at +5, but remains weak by historic standards.
    • The balance of firms looking to increase investment in plant and machinery held at +5 and fell slightly from +14 to +13 in training.
    • The balance of firms confident that turnover and profitability will improve over the next year decreased from +35 to +30 for turnover from +26 to +20 for profitability.
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