“Recruitment difficulties and tougher trading conditions face firms amid sluggish UK growth”

BCC Quarterly Economic Survey - Looking behind the headlines

Posted by Neil Ashbridge

Mon 06th, Aug

This was the headline for the recently published British Chambers of Commerce (BCC) Quarterly Economic Survey (QES) for Q2 2018. The overall results seemed positive on one hand with modest improvement in activity for the quarter, but seemingly less so on the other, with UK growth remaining sluggish.

This mixed picture was also reflected in the latest Bank of England’s Agents’ Summary of Business Conditions and the three-month data to May from the Office for National Statistics. Both highlighted the positive impact of the warm weather (and events like the Royal Wedding) which had helped to boost retail sales while growth in consumer services had slowed, notably in travel and tourism. Business services turnover had grown at a solid pace.  Overall industrial output contracted according to the official data though the Agents’ summary reported growth in domestic manufacturing output had edged up, with growth in export output easing slightly but remaining firm.

The Monetary Policy Committees decision to increase Bank Rate by 0.25% on 2 August came as no surprise.  The MPC acknowledges that the annual rate of growth in UK GDP remains modest by historical standards while there is a very limited degree of slack in the economy.  Unemployment was low and expected to fall a little further which was likely to feed through into domestic inflation over the next few years.  

Whilst overall the official data and surveys reflect a more positive picture than some might imagine from recent news headlines around Brexit and “trade war” rhetoric, there are key issues which need to be resolved to maintain even modest levels of optimism by business which the government must urgently address.

For example, the biggest concern for businesses continues to be the difficulties they face when trying to access skills, with the percentage of firms reporting problems rising again. This is one of the key issues on which the BCC is lobbying central government, focussing on the ongoing problems for employers with the apprenticeship and training schemes. In addition the need for clarity on immigration policy to allow UK businesses to cover vacancies is becoming even more pressing.

The response of local businesses to the BCC survey provides us with a more detailed picture on how much this is reflected geographically. 

The information provided by businesses in Liverpool and Sefton was broadly in line with the national results but highlighted a level of cautious optimism in some areas. In my view this is not only a testament to the resilience of the local economy but also a reflection of the willingness to create and respond to opportunities for economic growth, particularly amongst small and medium sized businesses (SMEs) who contributed over 87% of the responses to the Liverpool and Sefton survey.

In line with the national picture however, there was an increase in those reporting the recruitment of suitably skilled staff as a barrier to meeting their business objectives over the next 2 years (up from 39% to 47%). Despite this, current recruitment trends vary between the manufacturing sector where employers reporting difficulties continued to decline (36%) and the services sector where those reporting problems rose slightly (from 72% to 76%).

The changing attitudes of businesses in the region were also reflected in the fact that the number citing a lack of government grants towards investment as a barrier, dropped from 24% to 14%, reflecting perhaps a new pragmatism towards public sector funding.

As we approach Brexit deadlines, it will be interesting to see whether business confidence remains consistent and I would urge you all to complete the next QES (Q3) which will be available from 27 August. The BCC survey really does provide you with an opportunity to have your voice heard by government and rate setters.

If you would like more information on the results of the Liverpool and Sefton QES results please email policy@liverpoolchamber.org.uk

The results of the BCC survey can be found here

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