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News - 24 July 2003

UK Economy is still struggling

The British Chambers of Commerce has released the results of its Q2 2003 Quarterly Economic Survey, the largest and most representative independent business survey of its kind in the UK covering a substantial percentage of small businesses and the subsidiaries of large businesses.

The manufacturing and services sectors are significantly weaker than in most of 2002 but there has been a modest improvement in the last quarter, led by the manufacturing sector. Discussing the latest results from the Quarterly Economic Survey, David Frost, Director General of the British Chambers of Commerce, said, "These figures show that the Monetary Policy Committee's decision to cut interest rates could not have come any later. Confidence is still weak and these results are a modest improvement from a very low base. We should be in no doubt: the manufacturing and services sectors remain in the doldrums."

Putting the UK situation into a global context, Mr. Frost noted that without a global economic upturn the outlook will remain weak and the room for manoeuvre in the US and Eurozone will be much smaller given their very low interest rates. Mr. Frost said, "The question we need to address is: 'How can we work together with our global trading partners to give the economy a boost?' The answer seems to be that the next round of world trade talks will have to be a success. This puts pressure on the EU to fully engage with trade policy reform together with liberalisation in the US and Japan."

For the full story visit the BCC site at The figures show that in manufacturing the best conclusion that can be derived is a shallow recovery subject to many persistent threats. The services sector is experiencing very limited growth as a result of weak home sales and new orders. In addition export levels remain in negative territory and prospects for recovery are highly uncertain following the sluggish economic performance to date this year.

Key findings - manufacturing · The sector's net balances for UK sales and orders improved slightly during Q2 but were still disappointingly weak and remained at lower levels than throughout the whole of 2002.

· Employment levels fell marginally during Q2 to the worst level since Q4 2001. Employment expectations also fell and were in negative territory during Q2.

· Physical capital investment plans slightly improved during Q2 but were still below the last three quarters of 2002.

· Sector cash-flow positions strengthened slightly and moved into positive territory but remained well below Q4 2002 levels.

· The overall confidence of turnover and profitability levels rose slightly during Q2 but was still well below the levels recorded in the first three quarters of 2002.

Key findings - services · Home sales fell marginally during Q2, to the lowest level since Q1 1999. Home orders rose slightly but were still lower than in any other quarter since Q4 1998.

· The sector's export indicators made little progress during Q2 and remained in negative territory.

· Sector employment rose modestly during Q2 but remained lower than during any other quarter since Q1 1999. Employment expectations also improved slightly but were still below the first three quarters of 2002.

· Turnover confidence rose slightly during Q2 but was still worse than any other figure since Q1 1999. Profitability confidence also improved slightly but was still well below the levels recorded throughout the whole of 2002.

Drawing his conclusions from the survey's findings, Mr. Frost said, "While it is a relief that the economic position has stabilised, this survey heightens our concerns over the business outlook and there is no sign of a sustainable recovery. Whilst we welcome the recent interest rate cut, we hope that the Bank of England will persevere with its flexible stance and be prepared to act again if circumstances worsen."

Discussing whether interest rates were the only mechanism available to the economy to stimulate growth, Mr. Frost said, "Lower interest rates cannot on their own underpin recovery. Given the dangers to the economy, the Government must be ready to take further action to ease the tax and regulatory burden facing UK businesses. With consumer spending at a low ebb and the housing market slowing down it is vital to support an upturn in capital spending."

For further information visit the BCC site at http://www.chamberonline.co.uk/cmn/viewdoc.jsp?cat=all&docid=BEP1_News_0000055282&eventtype=newsletterlink


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