The British Chambers of Commerce’s (BCC) last quarterly economic survey in 2019 of roughly 6,500 UK firms showed economic stagnation and causes for concern at the start of 2020. The November poll shows that companies are under pressure due to long-term uncertainty, the continuing global economic slowdown and the increasing costs of doing business.
Their forecast for economic growth in the final months of 2019 was 0.2%, down from 0.3% in the third quarter. This is marginally better than the Bank of England’s estimate of 0.1% for the final quarter of 2019, though this was a slightly downbeat projection due to the uncertainty around the election in early December.
The BCC’s overall estimate for economic growth in 2019 was 1.3% and it is predicting a slowing of growth to just 1% for 2020 – the weakest performance since 2009.
Export growth stalls
The BCC survey has also found that export sales are stalling in both services and goods. For services it reported a drop from 6% to 5% with export orders slipping from 1% to 0%.
For manufacturing the export orders balance remained stuck at -3%, despite the value of the pound against the dollar having fallen by 10% since the referendum vote in 2016. This was the first time the economic orders balance has been negative for two consecutive quarters since the autumn of 2009.
Worryingly, cash flow – an important indicator of business health – remains weak, improving only slightly from its lowest level in 8 years.
New year, new government, new approach needed
The figures from the end of last year come with the caveat of the parliamentary uncertainty that had hindered business planning and government activity throughout 2019.
With Boris Johnson’s majority set to give the government greater authority and license to implement Brexit and its broader agenda, it is hoped that businesses will be able to operate with greater clarity and confidence, though the impact of Brexit remains a major consideration.
Adam Marshall, Director General of the BCC, said:
“The end of political deadlock at Westminster must also bring action to renew business confidence and tackle the prolonged stagnation that’s affecting so much of the UK economy. If ministers take action to reduce upfront costs, move key infrastructure projects forward, and to help businesses on training, they’ll be rewarded with increased investment.
“However, they also must move quickly over the coming weeks to ensure that Brexit is done right. A clear future trading relationship with the EU is also crucial to many firms’ future investment and growth prospects.”
Source: UK economy in stagnation at end of 2019, survey shows (The Guardian, 02/01/2020)