The British Chambers of Commerce’s quarterly economic survey finds that the UK economy ended 2018 stuck in a weak holding pattern, with stagnating levels of growth and business confidence as a result of heightened Brexit uncertainty and other economic pressures.
- Percentage of services firms reporting an increase in domestic sales and orders drops to two-year low
- Recruitment difficulties in manufacturing joint highest on record, services sector recruitment difficulties hover near record-high
- Price pressures rise further for businesses, particularly manufacturers
The results underline the impact that the current levels of uncertainty are having on a stalling economy as growth in domestic sales and orders reduced, recruitment difficulties stand near record highs and price pressures persist. In services, the percentage of firms reporting an increase in domestic sales and orders weakened to its lowest in two years. Domestic activity among UK manufacturers also moderated.
The findings highlight the extent to which labour shortages have risen in the UK as four-fifths (81%) of manufacturers that tried to recruit report difficulties in finding the right staff – the joint highest level since the survey began in 1989. In services, the level (70%) hovers close to the record high recorded in the previous quarter (72%).
The survey results indicate an increase in price pressures facing firms. The percentage of manufacturers expecting to raise prices is at its highest in a year and is almost three times higher than its pre-EU referendum average. Cashflow continues to be a concern for both sectors, with the balance of firms reporting improved cash flow remaining weak.
Suren Thiru, Head of Economics at BCC, said:
“Domestic activity in services weakened for the second successive quarter, with consumer-facing firms particularly downbeat amid subdued household spending levels and tightening cash-flow. Manufacturing had an underwhelming three months, with significant cost pressures and moderating global demand weighing heavy.
“With results showing that price pressures from wage settlements remain relatively muted, there continues to be sufficient scope to keep interest rates on hold in 2019, particularly given the significant economic and political turbulence.”
Responding to the results, Dr Adam Marshall, Director General of the British Chambers of Commerce, said:
“Throughout much of 2018, UK businesses were subjected to a barrage of political noise and drama, so it’s no surprise to see muted domestic demand and investment. With little clarity on the trading conditions they’ll face in two months’ time, companies are understandably holding back on spending and making big decisions about their futures. Given the magnitude of the recruitment difficulties, business concerns about the government’s recent blueprint for future immigration rules must be taken seriously – and companies must be able to access skills at all levels without heavy costs or bureaucracy.”