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Chambers Quarterly Economic Survey Q4 2019: UK economy stagnating as service sector slows
The British Chambers of Commerce’s Quarterly Economic Survey reveals that the UK ended 2019 in stagnation, amid long-term uncertainty, rising business costs and a slowing global economy.
The latest results of the survey – which is the largest of its kind in the UK and a leading indicator of GDP growth - found protracted weakness across most indicators of economic health in the final quarter of 2019.
- Norfolk’s service sector indicators worsen and remain well below their historic average
- Norfolk indicators for manufacturing cashflow, home orders, and investment continue to worsen and are firmly in negative territory
The service sector, which accounts for almost 80% of UK economic output, saw a large majority of its key indicators worsen compared to Q3 2019. These indicators remain well below their historic average.
The balance of manufacturers reporting a rise in domestic and export sales fell drastically. However, the balance of manufacturers reporting increased export orders rose from the previous negative position in Q3.
Investment intentions remain weak by historic standards – the balance of local firms in the manufacturing sector that plan to increase investment in plant and machinery dropped back to a negative position – whilst the fall was not as great, both the National and the East of England results also fell.
Cashflow – a key indicator of the health of businesses – Nationally showed a slightly improved result, but remained very weak across both manufacturing and service sectors. Locally, both the Norfolk and the East of England service and manufacturing sectors reported decreased cashflow (-6 and -10 respectively in Norfolk and -10 and -4 in the East of England).
Suren Thiru, Head of Economics at the British Chambers of Commerce (BCC), said:
“The UK economy limped through the final quarter of 2019.
“The fourth quarter was characterised by a broad-based slowdown in the dominant services sector with all key indicators weakening in the quarter, amid sluggish household expenditure and crippling cost pressures.
“Despite some improvements, indicators in the manufacturing sector remain very weak by historic standards, and with indicators for domestic and export orders continuing to contract, the near-term outlook for the sector remains challenging.
“A faltering service sector together with listless manufacturing activity points to a downbeat outturn for UK GDP growth in the fourth quarter of 2019”.
Responding to the findings, Nova Fairbank, head of Policy for Norfolk Chambers of Commerce said:
“The end of political deadlock at Westminster must also bring action to renew business confidence and tackle the prolonged stagnation that’s affecting so much of the UK economy. The government must use its newfound majority to take big decisions to stimulate growth.
“We would like to see ministers take action to reduce up-front costs, move key infrastructure projects forward, and to help businesses on training, they’ll be rewarded with increased investment.
“However, they also must move quickly over the coming weeks to ensure that Brexit is done right. A clear future trading relationship with the EU is also crucial to many firms’ future investment and growth prospects.”
Key Norfolk findings in the Q4 2019 survey:
- The balance of firms reporting increased domestic sales fell from +8 in Q3 2019 to -7. Those reporting increased domestic orders fell from 0 to -12.
- The balance of firms reporting improved export sales dropped from -5 to -12. Those reporting increased export orders fell from -5 to -31, and all-time low.
- The balance of firms reporting improved cashflow fell from +2 to -6
- The balance of firms looking to increase investment in plant and machinery remained at -14 but rose slightly from +7 to +9 for training
- The balance of firms confident that turnover and profitability will improve over the next year increased from +10 to +26 for turnover and from -5 to -4 for profitability. Despite these slight improvements, the figures still remain weak.
- The balance of firms reporting increased domestic sales fell from 0 in Q3 2019, to -20
- While those reporting increased domestic orders continued to fall from -11 to -20
- The balance of firms reporting improved export sales rose from -6 to +11
- The balance of firms reporting increased export orders improved considerably from -24 to 0
- The balance of firms reporting improved cashflow fell deeper into negative territory from -5 in Q3 to -20 in Q4
- The balance of firms increasing investment in plant/machinery fell from +10 to -10 and investment in training rose from +10 to +30
- The balance of firms confident that turnover and profitability will increase in the next 12 months fell from +38 to +10 for turnover and from +14 to 0 for profitability. This is still much lower than the post-recession average.