Memorandum submitted by the British Chambers
of Commerce (BCC)
1.1 The British Chambers of Commerce (BCC)
welcomes the chance to respond to the Business and Enterprise
Committee's request for comments on the impact of the credit crunch
on UK business and enterprise. The BCC is the national voice of
local business; a national network of quality-accredited Chambers
of Commerce, uniquely positioned at the heart of every business
community in the UK. The BCC represents over 100,000 businesses
of all sizes across all sectors of the economy that together employ
over 5 million people.
SUMMARY
2.1 The BCC's quarterly survey of over 5,000
businesses in the UK showed a marked deterioration in the prospects
for the UK economy between Q2 and Q3 2008. Measures of investment,
business confidence and cashflow, to name but a few, showed alarming
declines in the survey. This, in addition to the difficulties
businesses are having accessing finance, shows how small businesses
are suffering in the current economic climate. A long-term strategy
to help small businesses is required.
BRITISH CHAMBERS
OF COMMERCE
RESPONSE
How recent events in the world economy will impact
on the UK's business and enterprise, including business innovation,
trade and investment in new technologies and processes?
3.1 The BCC Quarterly Economic Survey (QES)
for the 3rd quarter of 2008 covered almost 5,100 businesses, employing
over 446,000 people. The results of the survey were alarming and
indicated that the UK economy is in recession.
3.2 The majority of indicators in the QES are
balance figures. A negative balance figure represents more businesses
reporting a decrease than those reporting increases, and vice
versa for a positive balance. The key figures from the Q3 QES
are:[9]
— The manufacturing sector's export
performance weakened sharply in Q3. The export sales balance dropped
25 points to +3%, the weakest since Q3 2003. The export orders
balance fell dramatically by 26 points to -4%, the lowest since
Q4 2001.
— The service sector's export balances
improved slightly in Q3. The export sales balance rose 4 points
to +13%. The balance for export orders rose 3 points to +9%. Both
service sector export balances remained low by historical standards.
— The Q3 balance of manufacturing firms
planning to increase investment in plant & machinery dropped
6 points to -4%, the lowest since Q4 2001. Intentions to invest
in training fell 3 points to +8%, the lowest since Q3 2003.
— In services, the number of firms
planning to increase investment in plant & machinery fell
7 points to -2%, the lowest since Q3 1992. Intentions to invest
in training dropped 10 points to +4%, a record low since Q2 1997.
— All the Q3 confidence balances, for
both manufacturing and services, were at record lows since Q1
1989, the earliest period for which figures are available.
— Both cashflow balances were very
weak in Q3, and both remain in negative territory: manufacturing
rose 4 points to -11%; services fell 4 points, to -14%, a record
low since Q1 1992, the earliest period for which figures are available.
3.3 Recent representations from businesses
to Chambers across the UK have reported serious concerns about
the availability of credit and the tightening of credit conditions.
Anecdotal evidence includes the rejection of finance for investment
projects to businesses that are financially sound and the increasing
costs of overdraft facilities.
3.4 While the BCC is encouraged to see that
parties across the political spectrum are focusing on how help
can be directed to the real economy, there needs to be a clear
long-term strategy for the ideas that are currently being put
forward. Small businesses are an integral part of our economy
and we need to support them. Cashflow and confidence are the two
key issues for businesses during a downturn, so a set of lasting
policies that reflect these is essential.
3.5 Our data is suggesting further recessionary
pressures in the economy, such as the recent labour market figures
(published 15 October 2008). In view of the deteriorating situation,
the Monetary Policy Committee must now seriously consider a half
per cent cut in interest rates at its November meeting and it
is also critically important for the Government to announce cuts
in business taxation.
October 2008
9 BCC, Quarterly Economic Survey, 07/10/08. Back
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