The British Chambers of Commerce yesterday urged the Bank of England to keep interest rates on hold for the rest of the year after its latest survey revealed a "disappointing" fall in business confidence.
Its poll of 6,000 companies found that optimism among services and manufacturing companies had dipped to its weakest level since the start of last year over the three months to September. David Frost, its director general, said: "Overall the survey results are not alarming but they are disappointing and positive moves to support the business sector now need to be made."
Analysts said that although the survey was not as weak as the City expected, it would be enough to keep the Bank from raising rates next month for a fifth time this year.
The BCC said its survey was the latest evidence that the UK economy had hit a "soft patch". Mr Frost said businesses had been hit by three blows rises in official and market interest rates, a surge in prices of commodities such as oil, and slower demand across its key export markets. "These have come together at a single point in time," he said, adding that several business managers across the country said they were exasperated by the growing weight of new regulations on business.
The survey showed that services suffered more than manufacturing with "marked" falls in domestic sales and orders, investment intentions and profit expectations. A balance of 30 per cent of companies saw a rise in home sales, down from 38 per cent in the previous quarter, while the balance on orders dipped to 23 from 28 per cent both the lowest level this year.
Manufacturing posted surprisingly strong results in the wake of the poor results from official data, with domestic orders rising sharply. However export sales slipped to a 12-month low.
The number of factories planning to take on staff rose to an eight-year high while their investment intentions rose to a seven-year peak. Services employment plans remained at a four-year high although investment intentions weakened.
Both sectors plan to raise prices, echoing the warning from Mervyn King, the Governor of the Bank, about signs of cost pressures across the economy. David Kern, at the BCC, said: "Additional rate rises might be dangerous because... the recovery may be faltering."Reuse content