UK economic growth stalling - survey

The British economy struggled in the second quarter, a survey showed on Monday, as Brexit and increasingly tougher global conditions held back growth.

The British Chambers of Commerce’s closely-watched Quarterly Economic Survey found that the manufacturing sector had endured a particularly tough three months.

The balance of manufacturing firms reporting improved domestic orders slumped to a seven-year low, falling to +4 from +9 in the first quarter. It was a similar story when it came to the proportion of companies reporting increased domestic sales, with that balane retreating to +10 from +15, the lowest since the second quarter of 2016, while the balance of those reporting improved export sales fell to +10 from +14, which also the lowest for three years.

Particularly striking was the drop in the balance of firms expecting prices to increase in the next three months, which slid to +28 from +42 in the first quarter.

And yet the number of firms which were confident that turnover would increase in the next 12 months rose to +38 from +26 and to +24 from +13 for profit expectations. But both readings were below those recorded in the final three months of 2018.

There was better news from the services sector, where a balance of +17 reported increased domestic sales – compared to +10 in the first quarter – and a balance of +6 saw export sales increase, compared to 0 three months previously.

However, the BCC said the pick up had been “modest” and was not enough to offset significant falls in the first quarter.

Suren Thiru, head of economics at the BCC, said: “Underlying economic conditions in the UK remain decidedly downbeat, with intensifying uncertainty over Brexit, the rising costs of doing business in the UK and a sluggish global economy combing to suppress key drivers of growth.

“The manufacturing sector endured a challenging quarter with the downward pressure from the running down of excess stock, tougher global trading conditions and rising upfront costs driving a deterioration in the number of key indicators.

“The overall easing in inflation expectations in the quarter suggest that consumer price growth will remain muted over the near term. This is welcome news for household finances and leaves the Monetary Policy Committee with more than enough leeway to keep interest rates steady over the medium term.”

Adam Marshall, director general of the BCC, said: “The next prime minister must take swift and tangible steps to inject momentum and confidence into the UK economy. Businesses want to see concrete and deliverable plans to tackle barriers to growth here at home, avoid a messy and disorderly Brexit, and restore the UK’s global reputation as a place to invest and trade.”

The quarterly report surveys more than 6,800 businesses employing a total of around 1.2m people and is closely watched by policymakers, including the Bank of England.