The modest improvement in the final quarter of 2005 follows a marked deterioration in previous quarters. Worsening trends seen earlier in 2005 may be stabilising. But weak balances across both sectors signal acute risks,” said David Frost, Director General of the British Chambers of Commerce (BCC).

The BCC today released the results of its Q4 Quarterly Economic Survey (QES), the largest independent business survey in the UK. The BCC believes that the Q4 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: “Any UK recovery in 2006 is likely to be weak and below trend. Without supporting action by the Bank of England and the Chancellor, there is danger of renewed relapse.”

“The manufacturing sector recorded improvements in its Q4 net balances for home sales and orders, employment, cashflow, and both confidence balances. But manufacturing recorded declines in its balances for export sales and orders, employment expectations, and investment in plant and machinery. Manufacturing has persistently failed to sustain recovery and, in spite of the modest Q4 improvement, the sector faces acute threats.

“Service sector Q4 performance also improved overall, but the results remain weak. Service balances for home sales, export sales and orders, investment in plant and machinery, and both confidence balances all rose. But the service sector recorded declines in its balances for home orders, employment, and employment expectations. The service sector’s Q4 upturn was from a low base, and the results are weak by historical standards. Prospects for services are mediocre and the sector will struggle to regain dynamism and re-establish its key role in sustaining output and employment.”

David Frost concluded: "The export and investment balances remain disappointingly weak across both sectors. Falling balances for employment expectations signal risks for future jobs creation. With UK growth remaining weak and below-trend, and with inflationary pressures easing, we urge the MPC to consider an early interest rate cut."