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Chambers Quarterly Economic Survey Q3 2019: Economic conditions weaken as manufacturing slump continues
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 Norfolk manufacturers reporting increased export orders lowest levels since before EU Referendum
- The balance of manufacturers reporting improved cashflow drops once again into negative territory
The latest results of the survey of 6,600 UK firms, including those from Norfolk, 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 Norfolk manufacturing sector, there was a marked downward shift in many indicators in the third quarter. The balance of firms reporting increased domestic sales remained weak and domestic orders also remained in negative territory – indicating more businesses saw a decrease than increase. The balance of firms reporting increased export sales dropped to its lowest level since Q1 2016 and the balance for export orders went negative and also stood at its lowest level since Q1 2016. Business confidence in turnover and profitability among manufacturers continued to fall.
The dominant Norfolk 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 extremely 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.
Reacting to the results, Nova Fairbank, Head of Policy for Norfolk Chambers of Commerce said:
“This is a reality check, not scaremongering or politicking. These are some of the worst Norfolk figures we’ve seen in sometime – and Norfolk jobs, businesses, and the future success of our local communities are on the line.
“Behind each and every one of these statistics sit thousands of real businesses, who are feeling the cold harsh winds of Brexit uncertainty and global trade turbulence right now.
“We need to see immediate action to avoid a messy and disorderly Brexit on October 31st, alongside bold measures to stimulate investment and confidence across the UK and Norfolk. The government must also make urgent preparations to support business cashflow, where the strains of acute uncertainty are hitting businesses, and particularly manufacturers, hard.”
Suren Thiru, Head of Economics at the British Chambers of Commerce (BCC), said:
“Our findings point to a worrying drop-off in UK economic activity, with unrelenting uncertainty over Brexit and a notable slowing in global growth prospects dragging down almost all the key indicators in the quarter.
“The manufacturing sector continues to toil under the weight of diminishing cashflow, weakening global demand and disrupted supply chains, and the data indicates that the sector was a drag on UK GDP growth in the quarter. Although the slowdown in a number of the key service sector indicators was relatively modest, slowing activity in the sector is a concern given its dominant share of overall UK economic output. A stuttering services sector coupled with a worrying downturn in manufacturing activity indicates that any bounce back in UK GDP growth from the contraction in the second quarter is likely to be underwhelming at best.
“Looking forward, weakening orders, confidence and investment intentions suggest that unless action is taken the UK’s current weak growth trajectory could drift markedly lower over the near term.”
Key findings in the Q3 2019 survey:
Norfolk Manufacturing sector:
- The balance of firms reporting increased domestic sales rose from -13 in Q2 2019, to 0, whilst those reporting increased domestic orders rose, but remained in negative territory from -19 to -11.
- The balance of firms reporting improved export sales fell from +23 to -6 and the balance of firms reporting increased export orders dropped from +15 to -24.
- The balance of firms reporting improved cashflow fell into negative territory from +25 to -5.
- The balance of firms increasing investment in plant/machinery rose in the quarter from -19 to +10 remaining historically weak, and investment in training rose from -6 to +10.
- The balance of firms confident that turnover and profitability will increase in the next 12 months fell from +50 to +38 for turnover and from +19 to +14 for profitability.
Norfolk Services sector:
- The balance of firms reporting increased domestic sales fell from +12 in Q2 2019 to +8. Those reporting increased domestic orders fell slightly from +4 to 0.
- The balance of firms reporting improved export sales fell from +4 to -5. Those reporting increased export orders continuing in negative territory fell still further from -4 to -5.
- The balance of firms reporting improved cashflow rose very slightly from -5 to +2 but remains weak by historic standards.
- The balance of firms looking to increase investment in plant and machinery drastically fell from +2 to -14 and fell slightly from +10 to +7 in training.
- The balance of firms confident that turnover and profitability will improve over the next year decreased from +30 to +10 for turnover from +12 to -5 for profitability.