The government must take “bold action” in next month’s Budget to address the problems that have resulted in recent anaemic economic growth, the head of the British Chambers of Commerce (BCC) said.

Brexit process weighing on business growth says BCC

Publishing the organisation’s Quarterly Economic Survey for Q3, BCC director-general Adam Marshall said domestic political uncertainty and the deadlock affecting Brexit negotiations were taking their toll on business confidence.Based on the responses from more than 7,000 businesses, the survey showed improvements in manufacturing but static growth in the all-important services sector. Both sectors reported increasing problems in recruiting the staff they need.Mr Marshall 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.”

Interest rates could harm economic growth

Suren Thiru, BCC head of economics, also warned that a sharp rise in interest rates could harm growth prospects.“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,” he said.“The latest results also confirm that rising costs remain 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 is considering raising interest rates. With UK economic conditions softening and continued uncertainty over Brexit, it is vital that the MPC (Monetary Policy Committee) 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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Services remain stationary while manufacturing moves forward

The survey showed that, in manufacturing, the proportion of firms reporting improved domestic sales and orders both rose in the quarter to their highest level since the first quarter of 2015. Export sales and orders also improved, as stronger economic growth recently in a number of key markets helped support demand for UK products. However, in services, which account for more than three-quarters of the UK’s GDP, domestic sales and orders remained static in the quarter. Almost all services indicators remained below their pre-EU referendum levels, with consumer-focused businesses reporting weaker growth rates than B2B firms.BCC added, “The results of the survey also show the prevalence of recruitment difficulties facing UK businesses, which worsened further in Q3. Almost three-quarters of manufacturers reported difficulties hiring staff, and in services, the percentage rose to its highest level since Q1 2016, and stands at three times the long-term average.”For related news and features, visit our Enterprise section.Relocate’s new Global Mobility Toolkit provides free information, practical advice and support for HR, global mobility managers and global teams operating overseas.Access hundreds of global services and suppliers in our Online Directory  

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