The Q4 2007 Quarterly Economic Survey of 4,600 members of the British Chambers of Commerce indicates difficult times lie ahead for the Government and Monetary Policy Committee if they are to steer a safe course for the UK economy in 2008.

The Q4 results are negative with most critical balances for both the manufacturing and services falling. Of particular concern for the service sector are export balances which are disturbingly weak while profitability confidence has plummeted by 17 points. The manufacturing sector also saw export performance worsen markedly in Q4, with plans to increase investment in plant and machinery falling by 12 points.

 

Across both the services and manufacturing sectors the pressure on pricing is worrying. The balance of manufacturing firms reporting pressure to raise prices rose 9 points in Q4 to +41%, an all time high. In services, the balance of firms expecting to increase prices rose 12 points, to +40%, also an all time high.

 

David Kern, economic adviser to the British Chambers of Commerce, said:

 

"The latest results show the tough position that the MPC is in as it contemplates its next move.

 

"Overall, the Survey results are negative. The critical balances for both manufacturing and services have fallen, with exports being of particular concern. The pressure that many firms are feeling on pricing show inflationary pressures that may be hard to keep a lid on.

 

"Talk of recession however is unjustified and must be strongly resisted. If the right policies are adopted the damage associated with an economic slowdown can be limited. Inflationary concerns cannot be shrugged off but a small interest rate cut early in 2008 will alleviate the credit squeeze, prevent a major confidence loss, and reduce the need for dangerous emergency measures later in the year."