British Chambers of Commerce - Quarter Three Economic Survey 2008
The British Chambers of Commerce Quarterly Economic Survey (Q3 2008) received over 5,000 responses from businesses of all sizes and sectors.
2008 Q3 results are exceptionally bad and follow worrying results in the second quarter. Virtually all the key national balances have worsened, and many are in negative territory.
The domestic economy is under immense pressure for the second quarter in a row, with the survey results showing that the UK is now in a worsening recession.
The BCC believes that if the Government and the MPC act immediately to return confidence to UK plc, a major recession can be avoided.
Businesses and consumers need a half-point cut in interest rates at Thursday’s MPC meeting.
Key results from the survey show:
- Domestic balances, sales as well as orders, have moved deeper into negative territory, for both manufacturing and services
- All firm sizes, in both sectors, show negative Q3 domestic balances, a disturbing and unusual situation
- Manufacturing export balances plummeted in Q3
- Collapse in confidence across sectors
- All confidence balances, turnover as well as profitability, fell to record lows in Q3, for both manufacturing and services
- Cashflow balances remain negative in this quarter
- Recruitment dip across sectors
- Investment balances in plant and machinery moved into negative territory for both sectors
BCC Director-General David Frost said:
“We are clearly in a very difficult economic period but it is important that we retain a sense of proportion. Many parts of the business community continue to perform well.
“Confidence is critical and it is vital that businesses are shown leadership. The BCC will be showing such leadership in the coming months. “The Government needs to say that business taxes will be cut. The Bank of England need to cut interest rates immediately and politicians need to get behind our businesses in these challenging times. More than just growth makers – businesses are critical to our local communities.”
David Kern, economic advisor to the BCC, added:
“Overall, the alarming Q3 results point to worsening dangers of major economic downturn and rising unemployment. The results support the view that a UK recession has started and the downturn is getting worse. The domestic economy is under immense pressure.
“The mounting global banking crisis reinforces our view that immediate threats to growth are more critical than dangers of higher inflation. Without forceful and urgent corrective action, there is a serious danger that the recession will deepen and cause huge damage.
“The MPC must cut interest rates without delay, with a half per cent cut on Thursday. Over the next four months, interest rates must be cut to four per cent as a minimum.
“The Government must put in place a credible framework for dealing promptly with any financial institution that may experience problems. We need a comprehensive scheme that replaces the current ad-hoc and piecemeal arrangements.
“The smooth flow of finance to businesses must be sustained at all costs. Any thought of early tax increases must be quashed.
“While a moderate recession is very probably unavoidable, the worst consequences can be mitigated if correct policies are adopted.”