Disappointing economic results highlight challenges ahead says BCC

The survey, covering the first quarter of 2011 and combining 6,000 responses from businesses across the UK, is likely to have been negatively affected by the weather-related disruptions in December; however, this aside, the overall picture is still worrying.
While balances for the manufacturing sector remain positive and exports are still strong, there has been a worsening across all the key balances, pointing to a difficult economic environment in Q1. The service sector shows mixed results. Though many balances have risen in the last quarter, the improvement is slight and still inadequate.
Economic climate
Following the increase in VAT and as tough spending cuts begin to bite, the survey results suggest that the UK economy is still fragile. The results of the BCC’s Q1 QES are mediocre and disappointing, particularly for manufacturing. 
Export activity fell slightly but remains strong, particularly in the manufacturing sector. The manufacturing export sales balance fell seven points, to +30%. The manufacturing export orders balance fell 13 points, to +26%. Both manufacturing balances remain relatively high in absolute terms. 
Business confidence falls
The QES figures suggest that manufacturers are much less confident of increasing their expected turnover and profitability over the next 12 months than they were in Q4 2010. Turnover and profitability confidence has fallen to levels not seen since Q2 2009 (turnover figures falling 20 points to +28% and profitability down 20 points to +10%). 
Cashflow still a real problem
Businesses are still facing real difficulties in managing cashflow. The figures suggest business cashflows have been badly affected by recent shocks such as adverse weather conditions, and the VAT increase. 
Commenting on the results, David Frost, Director General of the BCC, said: “The results of the Quarterly Economic Survey show our economy faces a difficult year and that the recovery will be choppy. Exporting activity remains strong, but there have been sharp declines in confidence, and cashflow is still a real concern for businesses.
“While the Government has listened to calls to help the private sector create growth, there is more to be done in giving businesses greater confidence, and encouraging them to export, invest and create more jobs. As the public sector cuts start to bite, the Government must get the detail right on the measures announced in the Budget to generate economic growth by helping businesses thrive.”