Exports are driving the road to recovery, suggests latest Quarterly Economic Survey from the British Chambers of Commerce
It’s safe to say a wave of economic optimism is sweeping across the UK at the moment, as all of the signs are beginning to point in a favourable direction. Hot on the heels of yesterday’s news that our manufacturers had experienced their highest level of growth since May 2011, the British Chambers of Commerce (BCC) has delivered some equally tasty titbits in its Quarterly Economic Survey (QES).
The latest survey, which is made up of responses from over 7,400 businesses, shows that the majority of key balances strengthened in Q2 2013 compared with the previous quarter. The most positive figures appear to come from the export section of the survey, where we find the export deliveries balance in the service sector at its highest level (36%) since the BCC began conducting the QES in 1989. Meanwhile, the service export orders balance increased three points, to +29%, the best level since the all-time high seen in Q4 1994, which was +31%. And whilst manufacturing export balances may not yet have reached their pre-recession levels, the figures are still a marked improvement on the Q2 2012, and just serve as further proof that things are very much on the up.
Employment and confidence stats are also heading the right way, it would seem. Following a decline in Q1, the employment balance in manufacturing rose from 11% to 19%, whilst in services it jumped from 6% to 15%. And, as indicated by the Federation of Small Businesses (FSB) earlier this month, business confidence continues to boom, and is coming out above recession averages. The survey shows manufacturing turnover confidence rising seven points to +51%, the best level since Q3 2007, and service sector confidence rising six points to +46%, the highest it has been since Q4 2007. Things are just as rosy on the profitability confidence front, with a rise from +33% to +39% in manufacturing – the equal best level since Q1 2007 – and from +22% to +34% in services, the best level since Q3 2007. It’s difficult to argue that these stats aren’t encouraging, even if they are yet to return to pre-recession heights.
However, the picture is a little bleaker when we shift our attention to investment and cash flow matters. Following recent reports of SMEs’ cash concerns, it is probably of little surprise that cashflow balances remain weak in both manufacturing and services, even though the former experienced a two point increase. The services sector recorded a five point drop and now sits at +1%, which means it is 20 points below its 1997 peak. And while the balance of manufacturing firms looking to increase investment in plant and machinery rose nine points to +23%, it fell two points to +7% for services.
“The improvement in most key balances in Q2, building on the upturn recorded in Q1, supports our view that the UK economy is slowly strengthening,” said BCC chief economist David Kern. “If recent progress can be sustained, there are realistic hopes that growth forecasts will be revised up further.”
John Longworth, director general of the BCC, added: “If we want Britain’s economy to be great, rather than just good, pro-growth policies will need to continue for decades to come. Otherwise, we may be in for a long and slow road to recovery – a prospect with little appeal for either business or government.”
Therefore, it seems we would be unwise indeed to get too far ahead of ourselves just yet. But what a difference a year – or at least a quarter – makes.