October 11, 2013 - Rachel Miller
Confidence in the UK manufacturing sector is fuelling an economic growth spurt, according to the Quarterly Economic Survey (QES) by the British Chambers of Commerce (BCC).
The Q3 survey, made up of responses from more than 7,400 businesses, shows improvements in most key areas for both manufacturing and services compared with Q2, with many balances now stronger than their long-term historical averages.
In the manufacturing sector, six key balances are at all-time highs – although BCC warns this may be temporary. They are:
In addition, profitability among manufacturers is at +46%.
The service sector is also seeing significant growth, with turnover at +58%. However, several key services balances are still lower than pre-recession levels, even though they improved this quarter: employment expectations (+26%), cashflow (+12%), both investment balances (+17% for machinery, +24% for training), and profitability confidence (+39%).
John Longworth, BCC director general, said: "It is fantastic to see our small yet dynamic manufacturing sector doing so well, with our results suggesting a recent growth spurt. However, we need to ensure that this does not become an aberration, but rather the norm, particularly when the economic recovery is still facing external risks."
In the week that the IMF released its upgraded UK growth forecast, David Kern, BCC chief economist, said: "On the basis of these results, GDP growth in Q3 could well be around 0.9-1.0%, with our full-year forecasts for 2013 and 2014 likely to be revised up further."
However, he added: "These strong results must not lull us into a false sense of security. Growth will continue, but it is likely to slow slightly following this recent spurt."
Also this week, the Institute of Directors (IoD) announced the results of a survey that shows that 75% of IoD members said the outlook is now brighter than at any stage since the financial crisis hit in 2008.