The BCC today released the results of its Q3 Quarterly Economic Survey (QES), the largest independent business survey in the UK. The BCC believes that the Q3 QES, on top of other recent official statistics, strengthens the argument for the MPC to consider a cut in the near future.
Commenting on the results, David Frost said: “The Q3 QES results are alarming. The figures signal worsening threats for UK businesses, at a time when we had reason to expect a gradual improvement in the economy, after the sharp slowdown seen in the first half of the year.
“The BCC has already indicated that, following the recent ONS figures, we may need to reduce our 2005 GDP forecast from 2% to 1.7-1.8%. But in view of the QES results a further downgrading to 1.6% may be necessary.
“The manufacturing sector’s position worsened sharply and across the board. The manufacturing balances for home sales and orders, export sales and orders, employment, cashflow, and both key confidence balances, all fell in Q3.
“Manufacturing has persistently failed to sustain recovery, and the technical recession seen in the first two quarters of 2005 is very worrying. The sharp decline in Q3 manufacturing balances highlights acute threats.
“Service sector performance was more mixed, but disappointing overall. Home sales and orders, employment, employment expectations, and cashflow were up. But service export sales and orders, plant and machinery investment and, most importantly, both critical confidence balances, all declined in Q3.
“The service sector domestic balances remain weak, and there was only modest improvement following the sharp losses seen earlier in the year.
“The service sector’s mediocre Q3 overall performance, after sharp falls in balances in the previous quarter, is very disturbing. Prospects for services are becoming more hazardous and more difficult. The service sector will struggle to regain its dynamism and re-establish its crucial role in sustaining UK output and employment.”
Mr Frost concluded: The decline in all the export balances, for both manufacturing and services, signals serious problems. The planned cuts in export funding must be reconsidered.
“The steady fall in the critical confidence balances this year, for both manufacturing and services, is extremely worrying and requires an urgent policy response. It is vital to halt and reverse the decline in confidence.
“With the economy slowing sharply, and the business environment becoming more dangerous, it is important for the MPC to keep interest rates at the lowest level consistent with the inflation target in the medium term.
Tim Hutchings, Hertfordshire Chamber Chief Executive said." Whilst our members our generally doing alright now is not the time for complacency. Hertfordshire may well be prosperous but if we are to combat the current pressures in the domestic and global economy we will need to be a great deal more proactive than we currently are in supporting our local businesses".