British Chambers of Commerce: Business Conditions Improving in Q2
The British Chambers of Commerce have released a new report, indicating broad-based improvements to business conditions in the UK – although concerns remain around inflation levels, particularly the price of raw materials.
Of the 5,800 firms surveyed, 44% reported an increase in domestic sales in Q2, compared to just 28% the previous quarter. And fewer firms are reporting a decrease in sales: in Q1, this figure was 40% but has since declined to 20%.
The service sector has seen solid overall improvements: the balance of firms reporting increased domestic sales has risen to +20%, its highest level since 2018.
Even sectors of the economy that have struggled more in the pandemic – consumer services, hotels and catering – have seen steady improvements to their domestic sales. And after three quarters of rising cash flow problems, it seems these sectors are seeing improvements in that area too.
“The UK economy is in a sweet spot right now, with the rapid vaccine rollout, the release of pent-up demand as restrictions eased and ongoing government support driving a strong revival in indicators of activity in the quarter,” said Surien Thiru, the BCC’s Chief Economist.
But there are concerns about inflation levels, which now stand at 2.1% – above the Bank of England’s target rate of 2%. Rising prices have hit the manufacturing sector particularly hard, where they’ve increased by an average of 58%. This is the highest level since the quarterly economic survey began in 1989.
The price of steel, in particular, is causing concern: the going rate last year was £500 a tonne but is now £1300 – and this cost will be passed on to consumers.
Assessing the conclusions of the report, the BCC’s Director-General, Shevaun Haviland, was cautiously optimistic: “An economic recovery is beginning to take shape...[but] many businesses are far from being out of the woods yet.”
He pointed out that trading and travel restrictions still exist for many firms and warned that the government should not taper its furlough scheme until we take the final step in the roadmap. “Government should not see the signs of recovery demonstrated in our results as job done. They should see it as game on.”
The UK Business Awards will be held on July 8.