World Economy

UK Gov’t Gets Wake-Up Call

UK Gov’t Gets Wake-Up CallUK Gov’t Gets Wake-Up Call

The British government has been told to “wake-up” as further evidence of a slowdown in the UK economy emerged Monday morning from two separate surveys.

The British Chambers of Commerce Q1 economic survey found that growth in the UK economy continued to suffer in the first three months. In the services sector domestic sales and orders reached their lowest level for over three years. In manufacturing, domestic sales fell again and remain low in historical terms, dofonline reported.

According to the latest Business Trends Report from accountants and business advisers, BDO, the slowing services industry is knocking the confidence of UK businesses with its output index and optimism index falling for the past six consecutive months.

Both bodies urged the government to give more support to struggling businesses.

The BCC revealed that the manufacturing sector had seen a slight increase in the number of firms reporting improved export sales and orders but fewer have grown their workforce in the last three months.

Confidence Low

Last month the BCC's previous director general resigned after he breached the group's neutral stance on the referendum and spoke in favor of a British exit from the EU.

The BCC survey of more than 8,500 companies, the largest of its kind, painted a mixed picture of Britain's job market.

Pay pressures, a key determinant of policy for the Bank of England, eased overall.

In the services sector the percentage of companies struggling to recruit has risen to 63, the highest level for 18 years. Confidence in turnover and profitability for both sectors remains low by historical standards.

The balance of firms intending to invest in plant and machinery and training fell in the services sector.

Adam Marshall, acting director general at the BCC, said: “The UK economy is in a holding pattern. While the picture is static overall, there are clear indications that economic growth is continuing to soften. From sales and orders to confidence and investment intentions, many of the business indicators we track are at a low ebb.

The softening environment should be a wake-up call for Westminster. Further action is likely to be needed to support business confidence, encourage trade and underpin investment in the months ahead.”

The BDO said business optimism was at its lowest level in more than two years with firms feeling “starved of investment” and uncertainty about the UK’s future membership of the EU delaying spending decisions.

Additional Support Necessary

It said manufacturing businesses were particularly pessimistic with order books now likely to decline sharply in the next 6 months if nothing changes in government policy.

“The UK’s slowing economy is in need of additional support to protect its growth. Recently both the IMF and the OECD have warned of the dangers of too much austerity in the UK,” said Peter Hemington, partner at BDO. “The government can currently borrow at rates never seen before. It is in a prime position to safeguard economic growth by investing in our public infrastructure. Expansion in our road, house and rail building program could reignite UK manufacturing and our steel industry would be a prime beneficiary.”

A separate survey from credit card company Visa Europe suggested consumer demand, a pillar of Britain's economic upturn since 2013, held up well during the first quarter.

Its inflation-adjusted gauge of consumer spending, based on card transactions data, rose 2.3% year-on-year in March, up slightly from 2.2% in February.