Strong export sales continue to drive UK growth and business confidence is rising, but firms are struggling to recruit staff.
These are the findings of the British Chambers of Commerce’s latest Quarterly Economic Survey, the UK’s largest and most authoritative private-sector business survey.
Responses gathered from more than 7,100 businesses in February and March show that the economy continued to grow in the first quarter of 2018.
Every single indicator in the survey remained in positive territory, indicating growth rather than contraction.
In the service sector, a key driver of the economy, the proportion of firms reporting improved export sales and orders rose slightly, although overall growth was muted.
Consumer-facing industries continue to report tougher trading conditions than B2B firms.
In manufacturing, the proportion of firms reporting improved export sales stands at its highest since Q2 2014.
However, fewer manufacturers saw an increase in domestic orders, and the balance of firms reporting an increase in domestic sales, although positive, is at its lowest level since Q4 2016.
Tighter cash flow is an increasing concern for many and the skills shortages that have plagued businesses for the last few quarters did not ease significantly, with both sectors struggling to recruit.
Uncertainty, recruitment difficulties and price pressures remain persistent concerns for businesses.
Rob Johnston, Chief Executive of Cumbria Chamber of Commerce, said: “What growth we see in the UK economy is due principally to strong global trading conditions, rather than domestic demand, which remains muted.
“Uncertainty, recruitment difficulties and price pressures remain persistent concerns for businesses, even if short-term confidence levels remain resilient.”
The British Chambers of Commerce argues that the Government can and should do more to create the conditions for businesses to thrive.
Rob added: “At a time when businesses face stratospheric up-front costs, the apprenticeship system is in crisis, roads are being allowed to crumble and businesses are being blocked from hiring talent via arbitrary visa caps, it’s obvious that the key to improved productivity and competitiveness lies in getting the basics right.
“Sorting these business fundamentals must move to the top of the agenda.”
Key findings in the Q1 2018 survey
QES results are presented as balance figures – the percentage of firms that reported an increase minus the percentage that reported a decrease.
If the figure is a plus it indicates expansion of activity and if the figure is a minus it indicates contraction.
For example, if 50% of firms told us their sales grew and 18% said they decreased the balance for the quarter is +32% (an expansion). If 32% told us their sales grew and 33% said they fell, the balance is -1% (a contraction).
- Increased domestic sales +17
- Domestic orders +16
- Increased export sales +30
- Export orders +28
- 67% attempted to recruit and, of those, 69% had difficulty doing so
- Confidence in turnover +48
- Confidence in profitability +35
- Investing in plant and machinery +20
- Investing in training +22
- Expect prices to increase +41
- Reporting cashflow improvements +3
- Improved export sales, +13
- Improved export orders +10
- Improved domestic sales, +20
- Improved domestic orders +16
- 50% attempted to recruit and, of those, 60% had difficulty doing so
- Confidence in turnover +42
- Confidence in profitability +33
- Investing in training +18
- Investment in plant and machinery +12
- Expect prices to increase +31
- Reporting cashflow improvements +6