The British Chambers of Commerce warned of a “first alarm bell” for Britain’s rapid economic recovery after firms reported the weakest export growth in almost two years and a big slowdown in manufacturing.
The BCC’s quarterly economic survey – the largest of its kind in Britain – showed that while domestic demand for services continued to grow at a near-record pace, the picture for other parts of the economy deteriorated sharply.
“The strong upsurge in manufacturing at the start of the year appears to have run its course. We may be hearing the first alarm bell for the UK,” said BCC director general John Longworth.
Global financial markets have grown jittery in recent days after the International Monetary Fund downgraded eurozone growth forecasts and Germany reported the biggest fall in industrial orders since the financial crisis.
Yesterday’s survey adds to signs that Britain’s economy is facing increasing overseas headwinds as it tries to reduce its reliance on domestic consumer demand, and last month the Bank of England warned of the risks from the eurozone.
On Tuesday, weak industrial output data prompted the NIESR think tank to estimate that British gross domestic product growth fell to 0.7 per cent in the third quarter from 0.9 per cent in the second quarter.
Longworth said the BCC survey and the sterling’s recent strength boosted the case against an early interest rate rise by the BoE.
Most economists polled by Reuters expect the BoE to raise rates from their record-low 0.5 per cent by the first three months of next year, but some see a chance that this may be put on hold if the outlook darkens.
The BCC said growth in goods exports as well as export orders for goods and services was its lowest since the fourth quarter of 2012. Services exports grew at the slowest rate since the third quarter of 2012. Manufacturers’ growth in domestic sales and orders slowed sharply from a record high in the second quarter to its lowest since the second quarter of 2013.
However, sales remained strong in the services sector and confidence stayed high across the board.
The BCC urged the government to make things easier for small businesses by freezing local property taxes paid by businesses and improving access to finance.
The BCC survey was conducted between August 25 and September 15, and based on responses from 7,241 firms.