Growth in the UK economy is 'too weak' for a sustainable recovery, says a report by the British Chambers of Commerce (BCC). According to its second quarterly economic survey for 2012, UK GDP has shown little overall change. However, exporting activity in both the service sector and manufacturing firms showed a small improvement, indicating that businesses are turning to exporting as a source of growth.
Surveying almost 8,000 small and medium sized enterprises (SMEs), the report found that while businesses are growing the pace of activity was 'inadequate' and too slow. Positive business balances are still below levels seen before the 2007 recession. Meanwhile, the BCC painted a mixed picture regarding employment, with manufacturing firms not planning on hiring staff and the service sector expected to take on new employees.
The BCC is now urging the Government to take urgent measures to boost business growth, including the creation of a state-backed business bank and by pumping money into infrastructure projects. The BCC's director general John Longworth said: "Growth cannot wait. The government must take an imaginative and brave approach to stimulating the economy and helping businesses thrive. Headline grabbing u-turns on fuel duty are not enough to get the economy back on track."
David Kern, chief economist for the BCC warned that the economy could face 'major' upcoming obstacles from continuing austerity measures and problems from the Eurozone. "With the Diamond Jubilee reducing the numbers of days worked in Q2, and early estimates showing renewed falls in the erratic construction sector, it is possible that official figures for Q2 2012 may show negative UK GDP growth for a third quarter in a row," he said.
The BCC also questioned the accuracy of figures from the Office for National Statistics (ONS) in by which the UK economy is officially measured by. While the BCC believes that growth occurred over the second quarter, many economists believe that figures from the ONS released at the end of the month will indicate a decline.
David Kern added: "There are still unresolved questions about the ONS estimate, but regardless of that it is clear that the UK economy faces major challenges, and growth is inadequate
Discussing the current economic situation with a variety of clients, across many types of business and business sectors, a pattern is starting to emerge of a two tier economy. It seems that those who have a great deal of disposable cash or at least access to it are fairly insulated from the impact of the recession, all those businesses which deal in high value goods are doing well whilst those at the middle or bottom of the spending scale are having a hard time of it. The businesses that are weathering the financial storm are those involved in selling cars, bespoke furniture, jewellery, holidays whilst some of those in the food sector and related trades are struggling - this is only anecdotal evidence obviously but further discussions seem to indicate that restaurants are doing well but takeaways less so, the bubble seems to have burst in solar energy and garden equipment - so I imagine if you sell those solar powered garden lights you are getting stuffed from all sides.
A lot of businesses including, and let's be honest here, the Government have been banking on a glorious Jubilympic summer to restore the economy. Well it began badly with most of the country being under water for the jubilee celebrations, apart from those who were on the water taking part in the Thames pageant, and ended with doom and gloom statements about how the Diamond Jubilee had a negative rather than positive impact. The Olympics will apparently bring unprecedented levels of money flowing into the economy and you can't help thinking that the hoped for 48 medals are just a side show to the main event.