The 2013/01/11 at 08:11
Stéphanie Salti, in London
The latest British economic indicators blow hot and cold: while December figures for the manufacturing sector are better than expected, indicators for the services sector, covering three-quarters of British industry, have revealed their first monthly decline since December 2010. This is bad news indeed, making negative growth highly probable in the last quarter of 2012. While certain economists even talk of the high likelihood of a triple recession – a 50 % chance in the opinion of many – British businesses are hoping for an improvement in the country’s economic conditions this year.
The publication of a number of studies at the start of January support a burst of optimism in the business community. A survey carried out at the start of January by the EEF (the British manufacturers’ organisation for manufacturing companies) thus shows an even split between its members placing their bets on an improvement of conditions and those forecasting a deterioration of activity. This result is nevertheless more optimistic than the one obtained last year. Published on 8 January, the Quarterly Economic Survey compiled by the British Chambers of Commerce (BCC) also echoes this rise in optimism amongst its members, over 7,500 of whom shared their impressions on the situations of their companies throughout Britain during the last quarter of 2012. Despite wan economic growth, these companies, from both manufacturing and services sectors, have recovered confidence and are daring to be ambitious once again. “Fears that the economy returned to negative growth in Q4 2012 are not supported by our survey,” states the BCC. All indicators have proven to be in better shape in the last quarter of the year compared with the third quarter of 2012.
The BCC, which insists on the difference between businesses recording improvements and those recording decline, indicates that the balance for home deliveries rose by 5 points to 8 % in manufacturing in the last quarter of 2012 while the home orders balance climbed by 9 points to +3%. In the services sector, the home deliveries balance increased by 10 points to 11 %, in other words the best level since the second quarter of 2010, while orders rose by 9 points to +7%. It is nevertheless on the export market that improvements are most marked: services came out with higher balances than pre-recession levels in 2007, with growth of 24 % for deliveries and 18 % for orders. The BCC however notes that watchers should keep coolheaded: indeed, the indicators are very far off the averages recorded by these businesses in the long term, and far below their levels preceding the financial crisis in 2007.
Employment in the services sector remains unchanged from one quarter to another, while investment levels have continued to be very weak. Confidence is nevertheless on the rise amongst the surveyed businesses: concerning their prospects in terms of turnover progression, confidence rose by 19 points to +38 % in the last quarter, in other words the best level since the first quarter of 2008, and by 9 points to +41% in the manufacturing sector. The same observation can be made about profitability confidence, up by 12 points to +30% for manufacturing and up by 8 points to +22% for services. The BCC however remains very prudent about these shows of optimism. In the words of John Longworth, Director General of the BCC, “the UK economy will continue to face major obstacles as we head into 2013 and every effort must be made to kick-start growth. Politicians can make a difference to our economic success, as they have the power to deliver bold and imaginative measures that will drive growth.” However, the Director General points out, “the question is whether they will have the guts to do it.”