Yesterday, the British Chamber of Commerce unveiled the results of its Quarterly Economic Survey (QES), a comprehensive study involving around 5,000 firms. Notably, 91% of these businesses are SMEs, and they represent a diverse range of industries, with manufacturing accounting for 28% and services for 72%. Additionally, nearly half of these companies (48%) engage in exporting their goods or services.
The key takeaways from the QES from the British Chamber of Commerce are as follows
Price Expectations: Approximately 41% of UK firms anticipate price increases in the next three months. This marks a decrease from the 55% reported in Q1.
Cost Drivers: Labour costs emerge as the primary driver behind price rises, cited by 66% of all businesses, across most sectors.
Domestic Sales and Financial Indicators: Indicators related to domestic sales, cash flow, turnover, and profitability have stabilized, albeit at a relatively low level.
Business Investment: Business investment trends remain stagnant, with only 23% of surveyed firms reporting an increase. Concerns about interest rate hikes have risen to 45%.
Diving deeper into the figures, domestic sales have exhibited minimal growth compared to Q2, with services showing a slight uptick compared to manufacturing. The pressures of rising wage costs, raw materials, and utility prices have likely contributed equally to the challenges faced by manufacturing companies. Manufacturing businesses are particularly susceptible to these pressures, as remote and hybrid working arrangements, more common in Service companies, often mitigate the demands of higher utility costs. Moreover, raw materials account for a smaller portion of service company overheads.
Business investment remains lacklustre, with only 23% of the surveyed firms making significant investments in their operations. The spectre of rising interest rates plays a significant role in this trend. However, if inflation stabilizes or decreases in the coming months, the Bank of England may opt to maintain current interest rates, offering potential stability for businesses considering capital investments.
Do the figures of the QES match our everyday finding?
Our observations while engaging with clients in the Southeast UK’s manufacturing sector align with these findings. Clients have reported extended project approval timelines as they deliberate over investments. Additionally, the dwindling pool of qualified candidates for job openings necessitates competitive salary offers for new hires.
Companies are searching for stability and reliable economic forecasts to make informed medium- and long-term investment decisions. After nearly a decade of uncertainty and turmoil, there may be some indications that the economic climate is shifting, although only time will provide a definitive answer.
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You can find full details of the survey over at the British Chambers of Commerce website using the link below.