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Quarterly Economic Survey: Economy improves and exports are still strong, but growth will be subdued
- BCC’s Quarterly Economic Survey for Q1 2013 shows progress on a national level, with almost all major balances improving compared with Q4 2012. However Norfolk and the East of England results are not so optimistic, with the manufacturing balance in particular showing a dip in confidence.
- Norfolk businesses are resilient, but many balances are still below pre-recession levels and growth remains too low.
The British Chambers of Commerce’s Quarterly Economic Survey (QES) released today (Tuesday) shows that the economy has made progress, but there are still some mountains to climb before it is fully back on track. The new survey, made up of responses from more than 7,000 businesses, shows that nationally most key balances in both the manufacturing and service sectors strengthened in the first quarter of 2013, with Norfolk export balances in services being stronger than the national totals. Business confidence, investment and training balances are also up. Although, cashflow for Norfolk manufacturers fell into negative territory for the first time since May 2012.
Despite welcome improvements, most indicators are still below their pre-recession levels seen in 2007. It is encouraging that Norfolk employment balances strengthened overall in the first quarter.
Caroline Williams, CEO of Norfolk Chamber said
“The findings suggest the economic outlook will improve gradually, and that growth will be positive but subdued this year. The results also demonstrate resilience among Norfolk businesses, many of whom are confident and looking to invest and increase exports this year. Overall, the Q1 results support the BCC and Chamber network’s view that the economy will record positive but subdued growth in 2013.”
Below outlines the Norfolk findings in the Q1 2013 BCC survey:
UK Sales & Exports
The Norfolk manufacturing home sales fell by 10 points to 10%, home orders also crashed by a massive 26 points to 0%. Manufacturing exports showed better results with deliveries remaining fairly constant, however export orders dropped by 13 points from 42% to just 29%. The national results showed a different picture, with both home sales and orders and exports orders and deliveries showing small improvements on the Q4 2012 results. Norfolk home sales and orders for the service sector both showed an increase of 5 points, with sales rising +19% and orders to +14%. Service sector export deliveries and orders also showed improved results with deliveries rising by 8 points to +68% and orders by 6 points to +66%.
Recruitment in the last 3 months has been slightly depressed for both the service and the manufacturing sectors, this was reflected across Norfolk, the East of England and at a national level. However going forwards, the Norfolk manufacturing employers appear to be more optimistic than the service sector, as 21% expected their workforce to increase over the next 3 months. This is a rise of 18 points from the previous quarter. The service sector only reported an increase of 2 points to 16% for expected recruitment over the next quarter. Both sectors in Norfolk and across the rest of the UK reported that difficulties in recruitment were still an issue for them.
The Norfolk manufacturing results deteriorated and fell into negative territory by 12 points to -7%. This was also reflected by the East of England manufacturers, where their results fell still further from -5% to
-11%. The national picture showed just a 1 point fall to +2%. Similarly, the Norfolk service sector cashflow results fell by 4 points to 0%, the East of England by 7 points to +4%, but the national results returned from a negative balance with a rise of 7 points to +6%.
Investment in Plant, Machinery & Training
Despite cashflow issues, the Norfolk manufacturers invested in plant, machinery and training. Plant and machinery results showed an increase from +6% to +14% and the training results rose by 4 points to +15%. The East of England and national manufacturing results reflected those seen in Norfolk. The Norfolk service sector recorded a downturn in investment in plant and machinery with a 6 point drop to +6%, but a small increase was recorded in training which rose by 2 points.
Turnover and Profitability
Both the manufacturing and service sectors in Norfolk showed improved confidence in their turnover, as both recorded increases. These were also reflected in the results for the East of England and nationally. However whilst confidence was high for turnover, the manufacturing sector in Norfolk, East of England and nationally advised that they were not expecting their profitability to improve. These results were similarly mirrored by the service sector, with the exception of the Norfolk service sector, whose results showed a 9 point increase in those companies expecting profitability to improve.
Operating at Full Capacity
As a result of the reduced results for both UK sales and Exports, the Norfolk manufacturers showed a decrease in the numbers of businesses operating a full capacity.
Possible Price Increases
Across both sectors in Norfolk and across the UK, there was a reduction in the number of businesses expecting to have to increase their prices. This is despite a rise in the number Norfolk and East of England manufacturers and service businesses who have advised that they expect their raw material prices to increase.
Factors of Concern
The turmoil surrounding the Euro is being reflected in the increased number of both manufacturing and service employers advising of rising concerns over the exchange rates, which could have a knock-on effect on their levels of export in the next quarter.
Commenting on the national results, John Longworth, Director General of the BCC, said:
“Although the progress seen in the first quarter of this year is modest, it is progress nonetheless. The government should be quick to implement the supply-side measures announced in the Budget to get growth moving, and consider new ways to support business confidence, which has continued to rise. It is clear from our survey that any growth this year will be slow and steady, and it is important that this does not veer off course. Recent welcome steps to improve business access to finance, including the commitment to create a business bank, must be followed through without bureaucratic delays. But the scale and scope of the new bank must go well beyond the government’s current plans. Although business supports the government’s plans to shift current spending towards capital investment over the next Parliament, it could go further still to boost growth in the short-term, such as through road maintenance and house building.
“We should not be satisfied with a long and tortuous road to recovery. These results provide a glimpse of the as-yet-distant sunlit uplands of recovery. Businesses up and down the country are working hard to drive the economy, create jobs and export, but they cannot accelerate this process alone. We must be proactive, bold and forthright to bolster business and foster every shred of growth as this will propel our economy forward during the months ahead.”
David Kern, BCC Chief Economist, said:
“The improvement seen in most key balances in Q1 supports our view that UK output continued to grow in the early months of 2013. The survey reinforces our assessment that recent GDP figures published by the ONS have exaggerated the weakness of the UK economy and the volatility in output.
“If an announcement of negative growth in Q1 is misleadingly described as a triple-dip recession, confidence will again be damaged unnecessarily. While the results do confirm that the UK’s economic performance is inadequate, they also show areas of strength.
“The surge in the service sector’s export balances suggests that pessimism over UK exports is unjustified. However the UK is increasingly becoming a largely service sector economy, and developing the export potential of the service sector is critical to our future long-term prosperity. We need a two-pronged strategy that combines a commitment to cutting the deficit, with a relentless drive to boost growth and the economy’s productive potential.”