BCC QES: Liverpool firms report stagnant growth

Fri, October 13th, 2017

Liverpool and Seftons results broadly consistent with the national results.

The British Chambers of Commerce (BCC) today (Friday) publishes its Quarterly Economic Survey – the UK’s largest and most authoritative private-sector business survey.

The results for Liverpool and Sefton businesses demonstrated a business environment that is broadly consistent with the national results.

Based on the responses of over 7,100 businesses, the survey shows that despite improvements in the manufacturing sector, the UK economy grew at a muted rate in the third quarter of 2017.

In the manufacturing sector, the proportion of firms reporting improved domestic sales and orders both rose in the quarter to their highest level since Q1 2015. The results for Liverpool and Sefton demonstrated an improvement in domestic sales at its highest level since Q4 2014. Export sales and orders in Liverpool and Sefton were stagnant or reduced relative to the previous quarter, despite increases nationally as stronger recent economic growth in a number of key markets helped support demand for UK products.

Nationally, in the services sector, traditionally the main driver of UK economic growth, domestic sales and orders remained static in Q3, as did the sector’s employment expectations, investment in training, and confidence in profitability and turnover. Almost all services indicators remain below their pre-EU referendum levels, with consumer-focused businesses reporting weaker growth rates compared to B2B firms.

Liverpool and Sefton businesses in the service sector reported broadly positive returns in sales and orders but demonstrated contracted growth relative to the previous quarter of survey responses.

The results of the survey also show the prevalence of recruitment difficulties facing UK and Liverpool and Sefton businesses. Whilst some of the challenges in recruitment reduced in the manufacturing sector, service industry businesses reported continuing difficulties in their attempts to recruit the right skilled people to fill available vacancies.

The muted results make clear the need for the upcoming Autumn Budget to provide a fillip to the economy – and begin to address some of the issues undermining the UK’s growth prospects, including skills gaps, high upfront costs and aging infrastructure. With Brexit-related uncertainty growing, the Q3 QES demonstrates the need for action to support a competitive and enterprising business environment.

Key findings in the Q3 2017 survey:

Manufacturing sector:
• The balance of firms reporting increased export sales reduced from +53 to +42, and export orders from +42 to +33, but this remained the second highest level since Q4 2014. The balance of firms reporting improved domestic sales rose from +35 to +45 (again, highest since Q4 in 2014), but orders reduced from +35 to +25.
• The percentage of manufacturers attempting to recruit increased, rising from 75% to 80%. The percentage of firms reporting greater recruitment curiously reduced from 73% to 56%
• Confidence in the manufacturing sector rose slightly, with +65 of firms confident that turnover will increase over the next 12 months – but profitability confidence was +35.

Services sector:
• Exports remained fairly flat, with the balance reporting improved export sales standing at +3 (down from +5 in the previous quarter) and orders at +7 (up from +5). The balance reporting improved domestic sales (+19) and orders (+15) both remained the same
• The percentage of businesses attempting to recruit increased, reducing from 61% to 52%. The percentage of services firms reported greater recruitment difficulties, rose from 73% to 74%, the highest proportion since Q3 2016
• Confidence remains static, with the balance of service firms confident of improved turnover (+45) remaining unchanged from the previous quarter whilst those confident of improved profitability reducing from 37% to 34%. Both balances are in line with their pre-EU referendum levels, contrary to the national position.

Paul Cherpeau, CEO of Liverpool & Sefton Chambers of Commerce, said:

“There is no doubt that the economy is in a period of relative stagnation. In Liverpool the survey results suggest that the business conditions remain OK albeit with the caveat that growth and investment opportunities are a little stuck.

Access to skills remains an ongoing issue, particularly in the service sector responses as reflected in the recruitment difficulties reported in this quarter. The prevailing sense of ambition and optimism towards future prospects is limited and largely indicative of the prevailing mood.

Businesses will continue to trade and adapt to prevailing circumstances, but must receive the clear messages and affirmative action that government can convey through a clearly articulated Brexit strategy and a renewed focus on domestic issues including investment in infrastructure development and a policy programme that enhances the opportunities for business to access or increase skills for the workforce.

Commenting on the results, Dr Adam Marshall, Director General of the British Chambers of Commerce, said:

“The uninspiring results we see in our third quarter findings reflect the fact that political uncertainty, currency fluctuations and the vagaries of the Brexit process are continuing to weigh on business growth prospects.

“The Chancellor’s Autumn Budget is a critical opportunity to demonstrate that the government stands ready to incentivise investment and support growth here at home. A failure to act, or a conscious choice to provide a short-term sugar hit to the electorate rather than the protein boost the economy needs, would have significant consequences for the UK’s medium-term growth prospects.

“While much of Westminster and Whitehall is distracted by Brexit, business needs action now on the home front. The solutions to some of the biggest issues currently facing our firms – including high up-front costs, a lack of incentive to invest, and a need for better infrastructure – are entirely within the power of the UK government to deliver.

“Now is the time to take bold action, and create the conditions to help the economy rebound from a period of anaemic growth. Government must demonstrate competence, coherence, and above all a clear plan to support the economy through a period of change.”

Suren Thiru, Head of Economics at the British Chambers of Commerce, said:

“The manufacturing sector saw a welcome improvement across a number of indicators, boosted in part by stronger growth in key export markets. However, the relative size of the sector means that its contribution to UK GDP growth is likely to have remained limited this quarter.

“The services sector remains under pressure, and with most indicators broadly static in the quarter, the sector has yet to recover from the loss of momentum suffered in the wake of the EU referendum.

“The latest results also confirm that rising costs remains a worry for businesses, particularly in manufacturing. However, while still high by historic standards, the easing in a number of indicators of pricing pressures since the start of the year suggests that inflation will peak sooner rather than later, possibly by the end of the year.

“Against this backdrop, it seems extraordinary that the Bank of England are considering raising interest rates. With UK economic conditions softening and continued uncertainty over Brexit, it is vital that the MPC provides monetary stability. We’d caution against an earlier than required tightening in monetary policy, which could hit both business and consumer confidence and weaken overall UK growth. While interest rates need to rise at some point, it should be done slowly and timed to not to harm the UK’s growth prospects.”

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