The British Chambers of Commerce (BCC) has called for, rapid, considerable and instant action to bolster the economy, as the UK’s largest independent survey, the Quarterly Economic Survey (QES) – of business sentiment and a leading indicator of UK GDP growth, observed that economic conditions in the UK had deteriorated at an exceptional rate in the second quarter of 2020.
The key findings of the report state that 11 out of the 14 key service sector QES indicators, including orders, sales, and cash-flow, have fallen to their lowest level in the 31-year history of the survey.
The balance of companies reporting increased domestic and export sales dropped a record 80 points from Q1 and is now considerably lower than the worst quarter of the recession in 2008-09.
The percentage balance of service industry firms reporting increased export sales dropped 55 points (to –55%) also a record and is currently 42 points lower than the worst quarter of the 2008-09 downturn.
The number of service organisations confident that there will be improved turn-over next year decreased from +38% in Q1 to -36%.
The retail, leisure and hospitality sectors connected to B2C (Business to Consumer) were also more likely to report reductions across key indicators than business-to-business (B2B) service sector firms.
The results of the survey of 7,700 businesses, employers of over 580,000 people across the country, exemplifies the full impact of the COVID pandemic in the second quarter of 2020, on the UK economy.
These figures mirrored very closely the manufacturing sector, where nine of the 14 key indicators for activity in the sector dropped to their lowest level on record.
Any hopes for a rapid economic recovery could be dashed, as forward-looking indicators (intentions over orders and investment) also dropped to record lows for both manufacturers and services firms.
With the economic impact of COVID-19 laid bare in the survey, the BCC has set out measures firms need from the Chancellor’s economic statement due later this month:
Substantial reductions in Employer National Insurance Contributions
Broader business rate reliefs and extended grant and loan schemes
Support for young people via wage subsidies for apprenticeships and work experience
Investment in productivity, people and carbon reduction via major incentives
Stimulate demand, through targeted ‘restart vouchers’ or a temporary VAT cut;
Regulatory processes streamlined to make life easier for businesses that don’t compromise safety or the environment.
Suren Thiru, Head of Economics at the British Chambers of Commerce (BCC), said, “Our latest survey highlights the extraordinary contraction in UK economic activity in the second quarter as the coronavirus closed large parts of the economy. The vast majority of indicators dropped to historic lows, with declines far exceeding those seen at the height of the global financial crisis. The services sector suffered particularly badly, with consumer-facing firms most acutely exposed to economic headwinds from the pandemic. The manufacturing sector had a dismal three months, with collapsing demand and major disruption to supply chains weighing on the sector. The unprecedented slump in business cashflow is a key concern as it severely hampers business activity and staff retention. With lockdown restrictions steadily easing, the second quarter is likely to prove to be the low point for the UK economy. However, the collapse in forward looking indicators of activity suggests that unless action is taken, the prospect of a swift and sustained recovery may prove too optimistic.”
Responding to the findings, Director General of the British Chambers of Commerce Dr Adam Marshall said, “Our results demonstrate the need for swift and substantial action. The Government has one chance to jump-start the economy and business confidence over the coming weeks – and they must take it. Business communities across the UK want to see a clearer, bolder roadmap to recovery that helps them restart, rebuild and renew. The UK cannot meander its way back to success in this era of uncertainty. The only way to re-kindle business and consumer confidence is to demonstrate an absolute and unshakeable focus on boosting the economy over the coming months.”
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