Overseas sales slowdown deals blow to export-led recovery

Hopes of an export-led economic revival suffered a blow yesterday after a survey showed businesses had suffered a slowdown in overseas sales and orders in the latest three months.

However, companies' confidence in their future profitability rose sharply in the second quarter, according to a poll of 1,300 businesses by the British Chambers of Commerce.

The BCC admitted its report painted a "mixed picture" and urged the Bank of England to stick to the policy of unchanged rates it has held for the past 11 months.

David Frost, the director-general of the BCC, said yesterday: "It is clear from the survey that the Monetary Policy Committee was right to hold rates at 4.5 per cent and we urge it to reject calls for early increases.

"Today's figures show worrying falls in export balances but business confidence experienced a welcome - albeit tentative - upturn."

Its survey showed the balance of manufacturers - the difference between those reporting a fall and a rise - seeing an increase in exports sales fell four points to 19 per cent, while the orders balance fell seven to 15 per cent.

The service saw sharper falls - seven points to 22 per cent - still relatively high on sales, and a slump of 14 points to 12 per cent.

Manufacturers' optimism about turnover rose to +49 - the highest in 18 months, while their profit expectations jumped 19 points to 40 per cent - the highest since 1999's fourth quarter.

Services companies were also upbeat about their prospects, with the confidence in turnover balance rising to 54 per cent from 51 per cent in the first quarter and the profitability measure edging up a point to 34 per cent. However, there was little sign of any inflationary pressure.

The balance of services companies that expected to be able to raise prices almost halved to 15 per cent. The figure for manufacturers showed a one-point drop to 21 per cent.

Meanwhile, the CBI urged the Government to develop a strategy to ensure its progress in delivering better access to finance for small businesses was not lost.