Manufacturing malaise triggers fears of slowdown in economy

The BCC warned of 'serious' challenges facing the UK's manufacturing sector

The BCC warned of 'serious' challenges facing the UK's manufacturing sector

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Britain’s two-tier growth trend has become further entrenched with the powerhouse services sector proving resilient while manufacturers continue to struggle, a major survey today suggests.

The latest quarterly report from the British Chambers of Commerce (BCC), based on the responses from almost 7,500 businesses, reveals a general slowdown in growth in the closing months of 2015. Most key balances for the services sector – about three-quarters of the economy – dipped slightly on the previous quarter, with domestic sales continuing to be the main contributor to overall growth. However, the sector continues to remain “resilient in the face of global headwinds”, the BCC added.

Manufacturing export sales balances fell to levels approaching stagnation during the fourth quarter of last year – the lowest since 2009. Domestic and export sales and order balances have now fallen well below their pre-recession levels in 2007, according to the survey.

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John Longworth, director general of the BCC, stressed that the UK economy remained in growth territory but it was also “clear that there are warning signs of potential trouble ahead”.

He said: “The declines across the board should send a message to government that UK firms are in desperate need of a favourable business environment, not more administrative burdens.

“It is not enough to rely upon consumer spending and the housing market to grow the economy, nor to rely purely on services to drive export growth. We need a rebalanced economy if we are to continue punching above our weight on the global stage.”

David Kern, the BCC’s chief economist, added: “Though our vibrant and resilient services sector will remain the main UK growth driver, the Q4 results indicate that it is also losing some of its momentum. But the challenges facing manufacturing are much more serious. While we must not forget the strengths of the UK economy – with higher growth than in most G7 economies and with a dynamic and flexible labour market – the recovery is still fragile.”

The survey comes after the latest purchasing managers’ index for the services sector, which was published yesterday, slowed slightly in December. The reading fell to 55.5 from 55.9 in November but remained above its historical average.

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