While findings from the British Chambers of Commerce’s (BCC) latest Quarterly Economic Survey suggest the recovery is slowing, Cornwall figures claim many local businesses remain more confident than elsewhere in the UK.
Responses from more than 5,000 businesses across the country indicate that the UK economy slowed considerably in Q3, following unusually strong growth recorded in the second quarter of the year.
“It is clear that the expected announcements regarding cuts to the public sector are unsettling some people in the private sector”
The manufacturing sector experienced a weakening of some balances, although there were positive aspects. Results from the service sector showed performance to be worse than the manufacturing sector, with all key service sector indicators, such as employment expectations and investment, slowing.
Despite the economy’s continued growth, serious challenges will be faced by the business community over the coming year as the austerity measures are implemented. To reduce the dangers of a major economic setback, the BCC says forceful action must be taken by the Government and the Monetary Policy Committee.
- The manufacturing sector turnover confidence balance rose seven points, to +49%, the strongest result since Q3 2007. However, manufacturers’ profitability confidence declined by three points to reach +23%.
- The service sector home orders balance fell nine points to –4%, dropping into negative territory after being positive in Q2. The service domestic balances, though much weaker than those for manufacturing, are still better than during the recession.
- The service sector employment expectations balance declined 10 points, to +1%, indicating the inability of firms to take on staff as 2010 ends.
- The Q3 cashflow balances worsened in both sectors and are worryingly weak. The manufacturing cashflow balance fell one point, to 0%. Services cashflow dropped eight points, to –11%.
Sales are still strong in most sectors:
- 76% of businesses report that UK Sales have remained the same or increased in Q3 (72% for Q2).
- 68% of businesses report that UK Orders have remained constant or increased over Q3 (61% for Q2).
Although signs of caution are creeping in, employment prospects remain strong:
- 84% of businesses had maintained or increased the size of their workforce; effectively the same as Q2(83%.) 88% expect to maintain or grow their workforce over the next quarter (down from 95% in Q2 2010).
Although business confidence remains buoyant, there are signs that uncertainty in the economy is beginning to affect investment decisions:71% of businesses intend to maintain or increase planned investment on training; down from 81% in Q2.
- 59% intend to maintain or increase current levels of investment in plant and equipment; down from 70% in Q2.
Commenting on the local figures, Richard Glover, chief executive of the Cornwall Chamber of Commerce & Industry said: “Once again the Cornwall figures are largely more positive than for the rest of the UK. However, concerns about profitability still show in the underlying data.
“It is clear that the expected announcements regarding cuts to the public sector are unsettling some people in the private sector.
“It will be good to end the uncertainty and begin to move the discussion from the gloom of budget cuts to a constructive debate about how to grow the private-sector.”
Commenting on the national picture, BCC’s chief economist David Kern said: “The results for the third quarter of this year show a marked slowdown in the pace of the recovery.
“However, it is important not to overstate the gloom. Growth remains in positive territory, and a new recession can be avoided. But the UK will face huge challenges over the year ahead. With worrying signs that the global economy may slow over the coming months, and with the public sector’s share in the UK economy set to shrink, it is vital to take forceful steps to sustain the recovery and support the private sector.”