UK economic growth to slow further, says British Chambers of Commerce

A report released today by the British Chambers of Commerce predicts further slowing of UK economic growth in light of ongoing uncertainty.

The British Chambers of Commerce (BCC) have released their latest Quarterly Economic Report, forecasting that UK economic growth is likely to slow further, in contrast to the upgraded GDP forecasts for the last quarter of 2015. The trade body surveyed over 8,500 companies, finding that the confidence of consumers and investors is low in the face of continued uncertainty, both globally and domestically, reflected in the low levels of sales and orders in the report.

With UK industrial output figures falling to the lowest in nearly two years in February 2016, down 0.5 percent on 2015, it is clear that the UK economy has slowed down throughout the first quarter of the year. Findings in the report from BCC demonstrate that the level of services firms’ domestic sales and orders also fell to three-year lows in the first quarter of 2016, along with a drop in domestic sales in the manufacturing sector, which is under increasing pressure from economic events.

The strongest manufacturing performance for Q4 2015 domestic sales balances were reported in London (+30%), followed closely by the West Midlands at +27%, then the North West at +25%. By contrast, the weakest manufacturing domestic sales balances that went into negative territory were 19%, in the South East, -9% in Scotland and the East of England at -6%.

Dr. Adam Marshall, Acting Director General of BCC, commented: “…The UK economy is in a holding pattern. While the picture is static overall, there are clear indications that economic growth is continuing to soften.”

Firms surveyed in the report said they were under pressure to raise prices from a number of factors, with raw materials being the biggest, followed by pay settlements, financial costs and other overheads. Carl Hasty, Director at Smart Currency Business, has seen this in companies struggling to manage the risk of currency volatility in response to economic stimuli:

“All of these factors are particularly connected to currency costs and the potentially massive risks that currency rate fluctuations pose to a business’s bottom line. Currency headwinds contribute to the rising cost of raw materials, can determine the timing and amount of pay settlements, and make up a significant proportion of a company’s financial and operating costs.

“With continued uncertainty in the UK in the run up to the referendum directly affecting the strength of sterling against its key currency pairings, the euro and US dollar, UK companies are under increasing financial pressure from the poor rates of exchange against the UK’s major trading partners in the US and Europe.”

David Kern, British Chambers of Commerce Chief Economist, warned in the report of the “mounting challenges” the UK economy will face in the coming years.