Manufacturers receive 'welcome' boost but services outlook flat

Manufacturing has been growing rapidly but the sector only makes up 10 per cent of the economy

Manufacturing has been growing rapidly but the sector only makes up 10 per cent of the economy Luke MacGregor Bloomberg via Getty Images

A survey of more than 7,000 businesses showed that the economy grew at a "muted" rate in the third quarter.

The survey found that the proportion of manufacturing companies reporting a rise in domestic and export orders in the three months to the end of September reached the highest level since the spring of 2015.

However, these improvements were offset by static growth in domestic sales and orders in the services sector, which accounts for almost 80% of the United Kingdom economy.

Suren Thiru, head of economics at the BCC, said: "We'd caution against an earlier than required tightening in monetary policy, which could hit both business and consumer confidence and weaken overall United Kingdom growth".

Economic growth in the United Kingdom was "muted" in the third quarter despite strong improvements in the manufacturing sector, the British Chambers of Commerce (BCC) has said.

The results of the survey also show the prevalence of recruitment difficulties facing United Kingdom businesses, which worsened further in Q3.

Hiring difficulties were facing businesses across both sectors. Almost three-quarters of manufacturers reporting difficulties hiring workers, while the services sector said problems recruiting staff were at their highest level since early 2016.

The percentage balance of manufacturing firms expecting the price of their goods to increase over the next three months remains well above the historical average, rising slightly from +34 to +35.

Expectations for future growth in the services sector were also muted, including employment expectations, investment in training, and confidence in profitability and turnover.

Services exports remained flat in the third quarter, with the balance of firms reporting improved improved sales overseas edging up.

The percentage of businesses attempting to recruit increased, rising from 49% to 52%.

Dr Adam Marshall, director general of the British Chambers of Commerce, said the survey results were "uninspiring" and "reflect the fact that political uncertainty, currency fluctuations and the vagaries of the Brexit process are continuing to weigh on business growth prospects".

"A failure to act, or a conscious choice to provide a short-term sugar hit to the electorate rather than the protein boost the economy needs, would have significant consequences for the UK's medium-term growth prospects".

"While much of Westminster and Whitehall is distracted by Brexit, business needs action now on the home front". He cited high up-front costs, a lack of incentive to invest, and weak infrastructure as key problems for business.

Now is the time to take bold action, and create the conditions to help the economy rebound from a period of anaemic growth, Marshall added.

Figures for the dominant services sector, which accounts for nearly 80 per cent of British output, show confidence remaining mostly unchanged over the quarter, albeit still below levels seen before the European Union referendum in June 2016.

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