The BCC’s quarterly survey of around 8,000 SMEs has concluded that the UK’s economic growth remains ‘too weak’. This is disappointing considering the data for Q2 shows that businesses have been growing – but far from sky-rocketing, it has been more of a damp squib. The problem is that growth is way too slow, according to the Chambers. Domestic orders for products and services have been weaker than pre-2007 levels.
The BCC has crunched the numbers to find out that overall, 8% of firms are expecting an increase in forward looking orders, a rise of 2 points. But in the vastly larger services sector of the economy, which comprises about 77% of our GDP, the balance of firms reporting an increase fell two points +5%. Whilst the manufacturing increase in orders will be welcome, the fall in expectations for services is a worry for an economy that is heavily tilted towards the services industries.
To combat the weakness in the domestic economy, it seems firms have become more imaginative about finding new revenue streams. There has been a small rise in exporting activity in both professional services and manufacturing in Q2 this year (to the end of June), confirming the BCC’s assertion that the domestic market is weak and companies are having to look elsewhere for growth.
Unfortunately, the picture doesn’t look much rosier when firms are asked about their general confidence. The figures showed that services firms intentions to invest in training remained unchanged compared with the last BCC survey. With manufacturing firms, similarly, intentions increased by a balance of just +1%.
The BCC’s director general, John Longworth, says the situation is becoming urgent, and in a statement called on the government to get serious about tackling such a slow pace of growth. ‘Growth cannot wait,’ he said. ‘The government must take an imaginative and brave approach to stimulating the economy and helping businesses thrive.’
Sounds great John, but can government have the kind of impact you’re talking about? Everything from the Enterprise Finance Guarantee Scheme to the most recent credit-easing programme has been tried; we still seem to be in the same hole. Looks like government may not have quite the magic bullet solution that Longworth is suggesting.
With the eurozone cauldron still bubbling away (and therefore a whole continent with depressed economic activity), it could be just a case of waiting for the storm to pass, and being thankful that many businesses are still finding growth in the short term…