The British Chambers of Commerce (BCC) Quarterly Economic Survey – Britain’s largest and most authoritative private sector business survey, based on over 8,200 responses from firms in Q2 2016 – suggests that UK economic growth was uninspiring in the run-up to the EU Referendum.
The survey – the biggest snapshot of how the UK economy was performing just before the referendum – shows that several key indicators remained static, or at a low ebb. Our services sector – the UK’s main driver of economic growth – saw domestic and overseas sales fall ahead of the referendum, and manufacturing sales remained at a historically low ebb. On the basis of our data we do not expect official data to record an improvement in UK GDP for Q2.
The results suggest that even before the uncertainty caused by the EU referendum result, uninspiring growth rates would have required future action to shore up business confidence and promote investment. The BCC calls on the government to get on with the big domestic decisions that underpin investment and business confidence, such as direct investment in the transport, energy, housing and digital schemes that can have a major impact on communities, supply chains, jobs and productivity.
Key findings in the Q2 2016 survey:
- Overall, the figures for both the services and manufacturing firms indicate continued low levels of growth. However, in the run-up to the referendum remained fairly static across many indicators, and slackened in others
- In the manufacturing sector, the balance of firms reporting improved export sales rose slightly to a percentage balance of +9 from +8 – although fewer firms reported an increase in advance orders (+5, down from +8 in Q1)
- However there has been practically no change in the number of firms reporting growth in their workforce over the last quarter in the manufacturing sector (+12, down from +13)
- The balance of manufacturers reporting improved cash flow fell three points to +4, and is now at the lowest level since Q2 2013
- Fewer manufacturers are looking to invest in training – down 8 points to +19, the lowest since Q1 2013
- In the services sector, the percentage of companies who are struggling to recruit fell slightly to 64, down from the 18-year high of 68
- Ahead of the referendum, fewer services companies reported an increase in export sales and orders (+11 and +13, down from +13 and +16 respectively)
- Fewer firms reporting improvements in domestic sales and orders in the last quarter. For manufacturing, the balance of firms reporting an increase in orders fell four points to +9, while in services this fell slightly by one point to +20.
- The balance of manufacturers confident that turnover would improve fell from +44 to +40 – the lowest level since Q3 2012. The balance of service firms confident that turnover would improve remained unchanged at +44 – and remains low by historical standards
- Pressure to increase pay rose slightly for services (30, up from 27) but fell for manufacturing firms (27, down from 33).
Commenting, Dr Adam Marshall, Acting Director General of the British Chambers of Commerce, said:
“Even before the EU referendum, both business confidence and economic growth were softening in many parts of the UK. Our latest survey results, captured just before the vote, suggest that many businesses have been operating in something of a holding pattern for some time.
“It is categorically too early to say what impact the referendum decision has had on most firms across the UK, as we have as yet had only anecdotal evidence from those facing challenges, those holding steady, and those seizing new opportunities. The impact of the referendum will require many businesses to take decisions whose impacts will take time to show up on the bottom line.
“Yet it is not too early for us to say what business wants to see: stability in markets, clarity in politics, and action on the issues that matter for growth. At a time of transition, all the businesses I speak to want Westminster to lead by example – by making bold decisions to progress key infrastructure and construction projects, by guaranteeing that EU workers can stay in British firms, and by seeking the best possible future terms of trade for the UK. Business confidence would be buoyed by strong and clear leadership, both on the timeline for EU negotiations and on the big decisions unrelated to our future relationship with the EU.”