POST Online Media Lite Edition



 

Cashflow problem for UK companies

Staff Writer |
The British Chambers of Commerce (BCC) published the results of its Quarterly Economic Survey for Q2 2018.

Article continues below




Based on the responses of over 6,000 businesses, the survey suggests that UK economic conditions remain sluggish, despite a modest improvement in activity in the second quarter of 2018.

In the dominant service sector, consumer-facing industries, such as hospitality and retail, continue to report tougher trading conditions.

Cashflow and investment intentions are falling significantly for retailers in particular as consumer spending, a key driver of UK growth, continues to remain subdued.

In the manufacturing sector, the balance of firms reporting improved domestic sales rose in the quarter, and the balance of firms reporting improved orders increased to the highest level since Q1 2015.

However, the size of the sector means that its contribution to UK growth remains limited.

The balance of manufacturers reporting improved export sales and orders eased in the second quarter, suggesting that slowing global economic growth is forcing firms to look domestically for sales.

A number of the key forward looking indicators, if sustained, point to a subdued outlook.

The number of businesses reporting that they are intending to invest fell in the quarter, and business confidence for both sectors also fell.

The biggest concern for businesses, however, continues to be the difficulties they face when trying to access skills, with the percentage of firms reporting problems rising again.

All this shows the economy is in a holding pattern, with annual economic growth this year set to be the lowest since the financial crisis. Much more needs to be done to put the UK economy on a surer footing.

The BCC calls for a push to fix the fundamentals for business – fixing the crisis-hit training system, improving connectivity, delivering infrastructure improvements, and incentivizing investment – to create a “Brexit hedge” for the economy.

At the same time, the government urgently needs to provide clarity on the real-world questions that businesses are asking on the UK’s status after leaving the European Union, to give firms a clear path that would enable them to invest and grow.

The balance of firms reporting increased domestic sales rose from +17 to +22, while the balance reporting improved domestic orders also rose, from +16 to +22.

The balance of firms reporting increased export sales fell from +30 to +24. The balance reporting improved export orders also fell, from +28 to +22.

The balance of firms increasing investment in training fell, from +22 to +19, while the balance of those increasing investment in plant and machinery held steady at +20.

The percentage of firms looking to recruit jumped from 67% to 77%, while the number of those struggling to recruit also rose, to 71%.

Cashflow continues to be a concern within manufacturing, with just +6% reporting improved cashflow. In construction, the balance falls to +2%.

The balance of firms expecting turnover to increase nudged down slightly to +47 (from +48).

65% of firms in the sector expect the cost of their raw materials to rise in the next three months.

Confidence that turnover will improve over the next twelve months eased slightly from +48% to +47% Confidence that profitability will improve over the next twelve months held stea

y at +35% Services sector:

The balance of firms reporting increased domestic sales rose from +20 to +23, while the balance reporting improved domestic orders fell slightly from +16 to +15.

The balance of firms reporting increased export sales also rose, from +13 to +15. The balance reporting improved export orders also rose slightly, to +12 from +10.

The balance of firms increasing investment in training fell slightly to +16 from +18.

The percentage of firms looking to recruit rose from 50% to 60%, but the number of those struggling to recruit also rose to 63% (from 60%).

Cashflow is a concern, with just +9 reporting improved cashflow.

Consumer-facing firms struggled more, with the number falling to just +

The balance of firms expecting turnover to increase in the next year nudged down slightly, from +42 to +40.

Among B2C firms, the balance of firms expecting to turn a profit is +21, compared to +43 for B2B firms.

Confidence that turnover will improve over the next twelve months eased from +42 to +40 Confidence that profitability will improve over the next twelve months decreased from +33 to +29.


What to read next

Economy tops Americans' minds as most important problem
Companies in central and eastern Europe to recover slowly
Almost half of European businesses say corruption a problem