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UK economy shows improvement although still weak
The UK economy has shown 'encouraging' signs of improvement in the first three months of this year, although the pace of recovery is still 'too slow', the British Chambers of Commerce (BCC) has said.
The BCC, publishing its latest Quarterly Economic Survey, found that economic growth for the first three months of 2012 stood at 0.3 per cent but warned that growth was still 'weak' compared to activity before the 2007 recession.
The BCC results come after the economic think tank OECD said that it expected the UK economy to slip back into recession after contracting at the start of the year.
The survey, comprising of more than 8,000 responses from business across the UK, found that most balances recorded increases from the last quarter of 2011, with more businesses looking to invest in recruitment, training, and new machinery.
Growth in the service sector, which includes hotels, restaurants, banks and transport, on the other hand, was described as particularly 'sluggish'.
Key points in the BCC's survey included:
- Domestic orders: Manufacturing and service sector balances for home deliveries and forward looking orders rose to the strongest levels since the second quarter of 2011.
- Business confidence and investment: Confidence has improved from the last quarter, although it remains weak by historical standards. Manufacturers planning to invest in plant and machinery has increased by +17 per cent, while intentions to invest in training increased by seven points to +17 per cent.
- Employment: Both the manufacturing and service sectors expanded their workforce in the last quarter. It forecasts that employment, currently at 2.67 million, will rise further over the coming year, but at its slowest pace for a year.
- Cashflow: Balances still remain weak. Although the services cashflow balances rose four points, they are in negative figures (-4 per cent). Manufacturing cashflow balances fell by one point to +1 per cent.
Commenting on the survey, David Kern, chief economist for the BCC, said that the UK economy still faces 'challenges', with the ongoing eurozone situation triggering problems later in the year, and growth likely to remain slow until 2013.
He added: "Every effort must be made to boost growth and empower the private sector to create jobs. While the government perseveres with efforts to cut the deficit, it must reallocate priorities, within the spending envelope, towards growth enhancing policies. Red tape must be cut more aggressively, the credit easing programme must be made more effective, and the Monetary Policy Committee must do more to ensure that the huge QE programme encourages increased lending to viable SMEs."