MANUFACTURING and export growth fell steeply in the third quarter in what may be the “first alarm bell” for the economy, a leading business group said today.
Figures compiled by the British Chambers of Commerce (BCC) suggested that while the UK was still growing, expansion slowed during the period.
These trends were reflected in Yorkshire, and the region’s chambers have warned against complacency and called on the Government to help create an environment for growth.
Mark Goldstone, the head of business representation and policy, at West and North Yorkshire Chamber of Commerce, said: “Our results show a slowing down in activity within the manufacturing sector. Exports also slowed in the last three months, symptomatic of a flat-lining Eurozone which still remains our largest trading partner.
“Elsewhere, service sector domestic sales remain at historically high levels, although we report a slowing down in the last three months.
“In the last quarter, we reported the highest levels of business confidence seen in a decade, and this quarter it remains largely unchanged with over two-thirds of companies in our region expecting increased turnover in the next 12 months. The chamber has reported a strong recovery in this region over the last year, but there is clearly no room for complacency.”
The national poll of more than 7,000 firms showed the increase in domestic sales and orders in manufacturing dropped sharply following all-time highs in the second quarter.
Growth in exports fell for both manufacturing and the dominant services sector, which represents three-quarters of UK output.
Steven Leigh, Mid-Yorkshire Chamber’s head of policy, reported that a number of economic indicators fell during the third quarter of the year.
He added: “This was unexpected, after we reported last time that the economic recovery had broadly been maintained. As we have often pointed out about the QES survey, optimism in some areas is counterbalanced by weaker figures elsewhere, and that peaks and troughs are to be expected. But quite a number of events over the summer period have occurred which have created uncertainty, and our survey reflects reduced levels of business confidence.”
Simon Dishman, the policy and information officer at Doncaster Chamber, who was speaking on behalf of all the South Yorkshire chambers, said today: “While there’s been a decline in domestic and export sales based on responses from this quarter’s economic survey, there is still an air of optimism among businesses from across the region. This is reflected in the most part by businesses stating that they had seen an improvement in their profitability and cash-flow, a positive sign that balance-sheets appear to be in robust health. Hiring trends were broadly in line with the previous quarter signalling optimism in the employment outlook for the region.”
However, Mr Dishman said that underlying problems linked to price pressures and skills shortages remained.
BCC director general John Longworth said: “As we predicted in our economic forecast, the strong upsurge in UK manufacturing at the start of the year appears to have run its course.
“We may be hearing the first alarm bell for the UK economy, but this need not be the case.
“The disappointing decline in exports highlights that we must do something radically different.
“Britain faces a major challenge in improving its trade performance, so we must waste no time in supporting trade opportunities to overseas markets which offer sustained growth.”
Mr Longworth called for investment to help UK firms look for exports as well as reform of business rates.
He added that concerns over the strength of the pound, together with the worsening outlook for the eurozone, reinforced the case against an early interest rate rise.
BCC chief economist David Kern said: “These results point to continued UK economic growth, but the pace is easing.
“The signs of the slowdown are particularly noticeable in manufacturing, where all the key domestic and export balances recorded declines in Q3.
“Noticeable falls in all the export balances and increased signs of slower growth require a forceful policy response.
“UK growth cannot rely permanently on consumer spending, and on unsustainable current account and budget deficits. Unless exports and investment play a bigger role in growth, the recovery will stall.”
The International Monetary Fund’s latest forecast suggests the UK remains on course to outpace the world’s major economies with growth of 3.2 per cent this year.