It also revealed that most key manufacturing and services balances were weaker this quarter, but manufacturing firms fared far worse than the service sector which continued to remain resilient in the face of global headwinds. This, said the BCC, has led Britain’s two-tier growth trend to become further entrenched.
It added: “The manufacturing sector continues to struggle. Domestic and export sales and order balances have now fallen well below their pre-recession levels in 2007, suggesting that the sector is close to stagnation. Firms are looking to increase prices markedly in the next 12 months, but are also thinking about investing more in plant and machinery, suggesting that the sector is keen to make the most of low inflation and low interest rates to improve productivity.”
John Longworth, director general of the BCC, said: “While these latest figures demonstrate growth, it is clear that there are warning signs of potential trouble ahead. The declines across the board should send a message to government that UK firms are in desperate need of a favourable business environment, not more administrative burdens.
“It is not enough to rely upon consumer spending and the housing market to grow the economy, nor to rely purely on services to drive export growth. We need a rebalanced economy if we are to continue punching above our weight on the global stage.”
He added: “The vast windfall from the OBR in the Autumn Statement led to revised forecasts based on improving tax receipts. However, businesses can’t focus on growing amid a storm of red tape and tax compliance burdens. In addition, government policy has created overwhelming pressure to increase pay settlements, despite downward pressure on wages created by continued migration to the UK. Businesses are finding themselves chafed and stagnating.
“The real concern is that this period of two-tier growth becomes the norm rather than a blip. This requires the government to make 2016 a year of action, on infrastructure, skills, and access to non-equity finance for firms. Otherwise the UK economy could suffer negative consequences in the face of increasing global uncertainty.”
Export sales in manufacturing declined nine points to +1%, the lowest level since Q3 2009 – while export orders also fell to +1%. Manufacturing sales balance fell seven points to +13%, while domestic orders were down eight points to +10%. Intentions to increase prices rose markedly in manufacturing, from +8% in Q3 to +19% in Q4.
On a more positive note, manufacturing reported increased intentions to invest in plant and machinery, rising six points to +24%.
