The British Chambers of Commerce and the question of growth

By Matt Kilcoyne

The British Chambers of Commerce has released the findings of its survey of 7,593 UK firms and it is a mixed bag of results for the UK economy. Overall the BCC, which represents over 104,000 UK businesses, found that the British economy had grown in the third quarter of this year by around 0.5%. This represents a stark departure from the gloom earlier in the year where it’s estimated that GDP shrank by 0.4% Q2 and 0.2% Q1 and will be a welcome relief for the British chancellor George Osborne.

Yet this headline figure of growth, which happily for the Conservatives appears right in the middle of the Labour conference, does come with some heavy caveats. Namely, that whilst the top line figure appears positive, the underlying economy is hurting and almost all key balances had worsened in Q3 compared to Q2. Indeed the Government’s much lauded export lead growth policy, designed to rebalance the economy away from over-reliance on finance, is suffering with the third quarter levels dropping to a similar level as the end of 2011. This report coincided with the release of the Purchasing Managers’ Index which measures economic indicators and where an number above 50 represents expansion, below contraction, with the export PMI down from 48.8 to 48 Aug-Sep and the sixth month of continuous decline.

It doesn’t even stop there with manufacturing at 48.4 (well below the market expectation) and employment at 47. In addition to this bad news the input price for firms rising from 48.8 to 57.5 whilst output price fell showing that “firms have struggled to pass on the increase in their costs to customers”

BCC Director General John Longworth said: “Economic growth is weak and businesses are less confident and less likely to invest than they were at the beginning of the year “The BCC’s survey results should be a clear signal to Government that more needs to be done to stimulate growth alongside continued deficit reduction. Despite official estimates, we believe the economy is still growing, but it is slowing. We need immediate measures now to support confidence and investment, a radical long-term growth plan, and a continued commitment to deficit reduction.”

The BCC’s call for new means to stimulate growth will chime with UK voters that have increasingly become cautious on spending cuts with more and more wanting cuts done more slowly and the Coalition increasingly seen as managing the economy poorly.

Yet for all this woe it should be noted that the BBC and its members really do think that the economy is growing and that their businesses are surviving. This is a call for animal spirits to be revived and to get the British economy back to life. The BCC notes that the Liberal Democrat and Conservative coalition has policies in the pipe-line to get us moving again and wants to see them implemented quicker “such as implementing plans to create a British Business Bank as well as far-reaching proposals to unlock infrastructure investment”. These calls should ring warning bells for Labour leaders as businesses are not calling for Labour’s ‘Five Point Plan’ but for more Coalition policy.

If Labour are to gain back the some 5 million voters that deserted them between 1997 and 2010 then they will need to restore their economic credibility and one of the easiest ways for them to do this is to get the confidence of businesses and their workers. Whilst they’re on the wrong side of ‘wealth creators’ they will also be on the wrong side of the argument and quite possibly the wrong side of the house for the rest of their agenda.

Finally, to end on some good news and some brilliant news for the areas concerned, the economy in some of our most deprived communities is recovering at a pace well above average with Liverpool and Norfolk bucking the trend of negativity. Liverpool’s Chamber of Commerce saw optimism in sales, orders and exports with manufacturing sales performance is at the highest level since quarter four 2010 and orders at their highest since 2007; confidence follows mass investment from Car Industry giants providing job security and growth opportunity for other firms in the region.

If George Osborne’s deficit reduction strategy is to work, growth be returned consistently and the economy rebalanced the BCC’s calls for radical action will need to be heeded. If Labour is to regain power it will need to regain the confidence of business and promote policies that will actually work at getting the economy growing. The problem is until the politicking ends and we see a decent effort on all sides to go for growth, to talk up the economy and revive our desire for growth it’s quite likely that the economy will continue to stagnate and the news correspondingly bleak.

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