Economy starting to recover, BCC survey suggests

Thursday 10 January 2013

A new study from the British Chambers of Commerce (BCC) suggests the UK economy improved in the fourth quarter of 2012.

The latest Quarterly Economic Survey revealed stronger balances in both the manufacturing and services sectors - showing companies to be ambitious and primed for growth.

In the service sector, export balances are now higher than their average pre-recession levels in 2007 - offering hope that a sustainable recovery could be on the way.

Business confidence rose significantly in Q4 2012 compared to previous quarters, however it remained weak by historical standards.

Cashflow balances and business investment also strengthened in Q4, but were still down on boom-time levels.

UK economy 'is starting to recover'

John Longworth, director general of the BCC, said the UK economy appears to be making progress, despite the numerous challenges it faces.

"Although the improvements we have seen are slight, it is progress nonetheless, and highlights the determination and ability of the businesses we have here in the UK," he stated.

"Despite rising business confidence that the outlook will improve, it is clear that economic growth remains weak and that nurturing it must be a top priority."

Mr Longworth said the economy will continue to face major obstacles as we head into 2013, and "every effort" must be made to kick-start growth.

"Politicians can make a difference to our economic success, as they have the power to deliver bold and imaginative measures that will drive growth. The question is whether they have the guts to do it," he stated.

“It is a new year and the time for a new chapter in our economy. The government must build on measures announced in the Autumn Statement and deliver a strategy that combines deficit reduction with a realistic long-term growth plan, including immediate measures to support business confidence."

He argued that recent steps to improve access to finance, such as the commitment to create a business bank, must be implemented "at scale and with clear timetables".

Economy set for 'modest growth' in 2013

David Kern, chief economist at the BCC, said the survey shows welcome progress compared to the previous quarter, despite many balances being weak by historical standards.

He said the marked increase in confidence in services and manufacturing reinforces its view that the economy will record "modest positive growth" in Q4 2012.

"Fears that the economy returned to negative growth in Q4 2012 are not supported by our survey," Mr Kern stated.

"Plans to raise prices are higher, notably in manufacturing, but it is questionable whether price hikes can be carried out in the face of weak demand."

He said the BCC expects to see modest gross domestic product recovery in 2013 and 2014, however it is clear that growth "remains inadequate" and must be boosted further.

"The economic environment will remain challenging, both globally and in the UK, with a prolonged period of below-trend growth," Mr Kern stated.

"But British businesses remain resilient and we are confident that, with the right policies, growth will gradually improve over the next few years."

Posted by Steve Williams