Tuesday, 5 April 2011

Fragile economic recovery amid worrying overall picture for UK

The UK faces a fragile economic recovery, with a worrying overall picture, a survey has suggested. The latest quarterly survey from the British Chambers of Commerce (BCC) said firms faced cashflow constraints. The survey suggested that in the first quarter the economy returned to growth. But the BCC said "the upturn in Q1 is likely to have been only slightly larger than the decline of 0.5% seen in Q4 2010", when the severe weather caused disruptions. That would mean output levels were only "marginally higher" than they were before the weather took its toll, the BCC said. The Office for National Statistics (ONS) will release its first estimate of GDP for the first quarter on 27 April.

The survey, which questioned 6,000 businesses across the UK, said firms were being constrained by cashflow and price pressures. Some 80% of manufacturing firms said the cost of raw materials was putting pressure on them to raise prices. "Exporting activity remains strong, but there have been sharp declines in confidence, and cashflow is still a real concern for businesses," director general of the BCC, David Frost said.

The BCC's chief economist, David Kern, added that manufacturing still had the potential to drive the UK recovery, "but the international background has become riskier for Britain's exporters, while the domestic austerity plan will intensify pressures on businesses and consumers". "In addition, the mediocre performance of the service sector will hinder the number of new jobs created this year," he said.

BBC News