UK economy improving, but struggling to enter recovery phase

The results of the British Chambers of Commerce Q4 2009 Economic Survey show improvements in most key national indicators, and a particular boost for manufacturing. However, progress has generally been weaker than it was in the third quarter of last year.

The figures for Cornwall are even brighter, with significant improvement in all of the key indicators.

The results support the view that the national economy is on the brink of leaving recession, but they do not provide conclusive evidence of any robust and significant growth during the fourth quarter of 2009.

In Cornwall, there were some impressive differences from the national picture, where business confidence continues to grow:

• 63% of businesses report UK Sales have remained the same or increased in the last quarter (62% for Q3).

• 58% of businesses report UK Orders have remained constant or increased over the last quarter (51% for Q3).

• 82% of businesses had maintained or increased the size of their workforce since the last Quarterly Economic Survey; up from 78% in quarter 3. The same percentage (82%) expects to maintain or grow their workforce over the next quarter.

• 80% of businesses intend to maintain or increase planned investment in training; up from 74% in Q3.

• 64% intend to maintain or increase current levels of investment in plant and equipment; up from 61% in Q3.

• 82% of businesses expect their turnover to remain the same or to increase over the next 12 months; up from 73% for Q3.

• 78% expect to maintain of increase the profitability of their business over the next 12 months; up from 62% for Q3.

• Businesses appear under less pressure to raise prices. Business reporting pressures linked to raw materials fell from 38% in Q3 to 22% for Q4. Pressures to raise prices because of finance costs dropped from 23% in Q3 to 16% for Q4.

Commenting on the local figures, Martin Follett, Chairman of the Cornwall Chamber of Commerce & Industry said:

“Undoubtedly last year was tough for many of our members and few are expecting a bumper year in 2010. However these results do suggest that things have stopped getting worse, which clearly gives business owners confidence for the future”.

“Particularly heartening is the number of businesses that have maintained or increased their workforce. The national unemployment figures have consistently beaten the gloomiest predictions. It is a testament to the flexibility shown by employers and employees”.

Commenting on the national results, David Frost, Director General of the BCC, said:

“Although these results are not as impressive as hoped, they do contain some positive features - most notably strong improvements in employment and exports within the manufacturing sector”.

“Businesses are showing resilience despite difficult and uncertain trading conditions. Confidence is improving, and the boost in exports must be nurtured in order to strengthen Britain’s trade position globally, and to help rebalance the economy away from an over-reliance on the public sector.

“It is vital that the government now demonstrates a determination to support wealth-creating companies in 2010. Additional business taxes must be avoided, and the 1% increase to employers’ National Insurance Contributions planned for 2011 should be scrapped”.

”Unless the private sector is given the freedom to create jobs and wealth, the UK’s economic recovery will be slower than it should be, and we will face the serious risk of a double-dip recession.”

David Kern, Chief Economist at the BCC, added:

“With improvements in most key national indicators, the Q4 results support the view that we are on the brink of leaving recession. However, with a number of critical measures still in negative territory, the economy is struggling to enter the recovery phase”.

“All the Q4 domestic indicators are disappointingly feeble, especially in the service sector. Negative balances for investment in plant and machinery highlight the risks to Britain’s productive potential if sharp falls in business capital spending are not reversed”.

Posted 13th Jan 2010  by member Cornwall Chamber of Commerce & Industry