Recovery under pressure

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The British Chambers of Commerce’s (BCC) latest Quarterly Economic Survey (QES), released today (Tuesday), suggests that while the UK economy has returned to positive growth, the disappointing results highlight the fragility of the recovery.

The Q1 survey, combining 6,000 responses from businesses across the UK, is likely to have been negatively affected by the weather-related disruptions in December; however, this aside, the overall picture is still worrying.

Cashflow and price pressures continue to constrain businesses, with 80% of manufacturing firms stating that the cost of raw materials is intensifying pressures to raise prices.

“The real test of the pro-business rhetoric coming from the Government will be whether the policy detail provides more than warm words”

While balances for the manufacturing sector remain positive and exports are still strong, there has been a worsening across all the key balances, pointing to a choppy economic environment in Q1. The service sector shows mixed results. Though many balances have risen in the last quarter, the improvement, reports the survey, is slight and still inadequate.

Business confidence is also fragile, with national figures suggesting that manufacturers are much less confident of increasing their expected turnover and profitability over the next 12 months than they were in Q4 2010.

In the service sector confidence in future turnover grew slightly by five points to +31%, the highest since Q1 2010. However, service sector firms are less confident of increasing their profit in the next 12 months, with the balance figure falling seven points to +10%, a disappointingly weak level.

David Frost, Director General of the BCC, said: “The results of the Quarterly Economic Survey show our economy faces a difficult year and that the recovery will be consistently choppy. Exporting activity remains strong, but there have been sharp declines in confidence, and cashflow is still a real concern for businesses.

“As the public sector cuts start to bite, the Government must get the detail right on the measures announced in the Budget to generate economic growth by helping businesses thrive.”

The picture in Cornwall is broadly the same, which, as Cornwall Chamber chief executive Richard Glover points out, makes a change. He said: “For once, the figures for Cornwall follow the national pattern. In the past we have bucked the trends but the impact of increased costs and falling confidence has hit us too.

“The combination of uncertainty around public sector cuts, increased taxes, increased legislation and concerns about the future for interest rates is stifling confidence across all sectors.

“We agree with the BCC that the real test of the pro-business rhetoric coming from the Government will be whether the policy detail provides more than warm words.”

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