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Positive signs as recovery gathers strength, but risks remain, says British Chambers of Commerce

The economy has made further progress, according to the latest Quarterly Economic Survey from the British Chambers of Commerce.

Compared to Q1 2013, the survey finds that both employment balances and export levels have risen in the second quarter of this year.

However, it also shows that there are still risks that could derail the recovery.

Despite some welcome improvements, most indicators are still below their 2007 pre-recession levels and cashflow remains weak.

The latest BCC survey polled more than 7,400 businesses. It shows that most key balances strengthened in Q2 2013 compared with the previous quarter. Export balances remain strong, with the services export deliveries balance reaching its highest level (+36 percent) since the survey began.

The findings suggest that the economy will continue to strengthen gradually over the next year. The results also demonstrate resilience among UK businesses, with many firms looking to invest and increase exports this year.

Other key findings in the Q2 2013 survey include:

  • Export orders rose three points to +29 percent (the highest since 1994).
  • Employment balances rose in Q2, following their Q1 decline.
  • Business confidence has again increased, and is much stronger than average levels during the recession.
  • The investment picture is mixed. While the balance of manufacturing firms looking to increase investment in plant and machinery rose nine points to +23 percent, for services it fell two points to +7 percent.
  • Pressure to raise prices has continued to ease in Q2. In manufacturing, this fell by five points to +12 percent, with many citing reduced pressures from raw materials.
  • Cashflow balances are weak in both manufacturing and services.

John Longworth, director general of the BCC, said: “British firms are doing their utmost to drive recovery.

“The sheer strength of our export balances shows that companies have untapped potential to expand.

“It must be recognised that recovery will only be turbo-charged if we can create a truly enterprise-friendly economy here in the UK.

“If we want Britain’s economy to be great, rather than just good, pro-growth policies will need to continue for decades to come. Otherwise, we may be in for a long and slow road to recovery.” 

Clair Prosser, policy executive at Thames Valley Chamber, of which Swindon Chamber of Commerce is a member, said: “Members reported that UK sales had increased – as did advanced bookings.

“Export sales were exceptionally high: this is a strong recognition of members’ activity overseas and in new foreign markets. This also reflects the increase in our International Trade customer base.

“Almost 100 percent of members said that staff are being sought or recruited, which has not been reported for some time. Recruitment serves as a clear indicator that members are in a position to invest in the future.

“Members’ turnover and profitability improved over the last three months. This shows that they are bucking the national trend, surviving and continuing to strive ahead – in tough trading times.

“This is a strong start for the second half of 2013. Inflation remains the biggest threat, followed by competition and corporate taxation.”