BCC: ‘Swift, substantial and immediate action’ must be taken to bolster UK economy
The British Chambers of Commerce (BCC) has called for “swift, substantial and immediate action” to bolster the economy, as its Quarterly Economic Survey (QES) found that UK economic conditions deteriorated at an unprecedented rate in the second quarter of 2020.
The survey, which is the UL’s largest independent survey of business sentiment and a leading indicator of UK GDP growth, found that 11 of the 14 key service sector QES indicators fall to their lowest level in the survey’s 31-year history.
It also found that the percentage balance of firms reporting increased domestic and export sales is now substantially lower than the worst quarter of the 2008-09 recession.
The survey also revealed that indicators for longer-term business performance have dropped to record lows.
The service sector saw eleven of the 14 key indicators, including sales, orders and cashflow, drop to their lowest levels on record.
The BCC found that the balance of service firms reporting increased domestic sales dropped a record 80 points from the first quarter of the year and is now 28 points lower than the worst quarter during the 2008 financial crisis. Similarly, the balance of service firms reporting increased export sales dropped by a record 55 points (to –55%) and is now 42 points lower than the worst quarter during 2008 downturn.
The balance of service firms confident that turnover will improve over the next year decreased from +38% in Q1 to -36% in the second quarter of this year.
In the manufacturing sector, nine of the 14 key indicators measuring activity in the sector dropped to its lowest level on record. The balance of manufacturing firms reporting improved domestic sales was 62 points lower than in Q1. For the export sales balance, it is 55 points lower.
The balance of manufacturing firms that are confident turnover will improve over the next year decreased from +34% in Q1 to –31% in the second quarter of 2020.
The BCC has warned that hopes of a swift economic recovery could be dashed, as forward-looking indicators dropped to record lows for both services firms and manufacturers.
Business confidence has also plummeted to its lowest level on record among services firms and declined to its lowest level since the first quarter of 2009 for manufacturers.
Cashflow is also at its lowest level, with two-thirds of respondents reporting worsening cashflow.
Suren Thiru, head of economics at the British Chambers of Commerce (BCC), said: “Our latest survey highlights the extraordinary contraction in UK economic activity in the second quarter as the coronavirus closed large parts of the economy. The vast majority of indicators dropped to historic lows, with declines far exceeding those seen at the height of the global financial crisis.
“The services sector suffered particularly badly, with consumer-facing firms most acutely exposed to economic headwinds from the pandemic. The manufacturing sector had a dismal three months, with collapsing demand and major disruption to supply chains weighing on the sector. The unprecedented slump in business cashflow is a key concern as it severely hampers business activity and staff retention.
“With lockdown restrictions steadily easing, the second quarter is likely to prove to be the low point for the UK economy. However, the collapse in forward looking indicators of activity suggests that unless action is taken, the prospect of a swift and sustained recovery may prove too optimistic.”
Dr Adam Marshall, director general of the BCC, added: “Our results demonstrate the need for swift and substantial action. The Government has one chance to jump-start the economy and business confidence over the coming weeks – and they must take it.
“Business communities across the UK want to see a clearer, bolder roadmap to recovery that helps them restart, rebuild and renew. The UK cannot meander its way back to success in this era of uncertainty. The only way to re-kindle business and consumer confidence is to demonstrate an absolute and unshakeable focus on boosting the economy over the coming months.”
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