Boost in manufacturing has failed to lift the UK economy, survey suggests

The British Chambers of Commerce survey of private businesses found manufacturing firms saw a growth in domestic sales, orders and exports in the third quarter

Hiring difficulties were facing businesses in manufacturing and services (EPA)

A boost in manufacturing has failed to lift the UK economy, a new survey suggests.

The British Chambers of Commerce (BCC) quarterly economic survey, which is based on the responses of over 7,100 businesses, indicated that the economy grew little in the third quarter of 2017 despite firms in the manufacturing sector reporting domestic sales and orders at the highest level since the first quarter of 2015.

The survey questioned firms between 21 August and 11 September 2017.

BCC director general Dr Adam Marshall has called on the Chancellor Philip Hammond to show Government support for business in next month’s Budget as Brexit-related uncertainty grows.

Dr Marshall said: “The uninspiring results we see in our third quarter findings reflect the fact that political uncertainty, currency fluctuations and the vagaries of the Brexit process are continuing to weigh on business growth prospects.

“The Chancellor’s Autumn Budget is a critical opportunity to demonstrate that the government stands ready to incentivise investment and support growth here at home.

“While much of Westminster and Whitehall is distracted by Brexit, business needs action now on the home front.”

He added that the Government has the power to provide solutions to the greatest issues facing firms, which include high up-front costs, a lack of incentive to invest and a need for better infrastructure.

The Government needs to deliver a clear plan to support the economy through a period of change, he added.

Firms reported export sales and orders also grew in the manufacturing sector as economic growth in key UK markets has added to demand for UK products.

However, the service sector, which tends to be the key driver of UK economic growth, saw domestic orders and sales remain static. Its employment expectations, investment in training and confidence in profitability and turnover have also stayed much the same.

Hiring difficulties were facing businesses across both sectors. Almost three-quarters of manufacturers reported recruitment difficulties, while in the services sector troubles hiring staff were at their highest since the first quarter of 2016.

In the service sector, almost all of the survey’s indicators of growth stayed below their levels before the Brexit-vote. Consumer businesses reported weaker growth than business-to-business firms.

Suren Thiru, head of economics at the BCC, said: “Against this backdrop, it seems extraordinary that the Bank of England are considering raising interest rates.

“With UK economic conditions softening and continued uncertainty over Brexit, it is vital that the MPC (monetary policy committee) provides monetary stability.”

Mr Thiru added: “While interest rates need to rise at some point, it should be done slowly and timed to not to harm the UK’s growth prospects.”