A new survey reports businesses expect the pace of economic recovery to moderate in the second quarter, striking a rare cautious note after a run of bullish data.
Despite remaining high by historical standards, most of the key balances, including the proportion of companies reporting increases in export sales and the percentage of companies expecting to increase their levels of business investment, dropped compared with results from the British Chamber of Commerce’s survey for first three months of the year.
John Longworth, director-general of the BCC, said the declines came after the economy “jolted forward” at the start of the year and indicated that it had “settled into a period of more stable growth”.
He said: “These are strong results that show the recovery is moving forward.”
Growth for the first quarter of the year was confirmed last month at 0.8 per cent, with second-quarter figures set to be released at the end of July, when the UK’s deepest downturn in more than 80 years is expected to be officially consigned to the history books.
Strong survey data have raised economists’ expectations that growth may accelerate, bringing forward the timing of a first interest rate rise.
A survey for Lloyds Bank last week showed business confidence at its highest level for 22 years, while the purchasing managers’ survey showed manufacturing booming, with Britain’s factories enjoying one of their best quarters of output growth in 20 years.
But David Kern, the BCC’s chief economist said while the recovery was continuing at a “satisfactory pace”, progress towards rebalancing the economy remained “inadequate“.
He said falls in the export and investment balances among the nearly 7,000 businesses – the vast majority with fewer than 500 employees – in the survey were “a stark reminder” that the recovery was not yet secure.
Pointing to concerns about the strength of sterling, uncertainty about early interest rate rises, the size of the current account deficit and excessive household debt, he added: “Unless investment and net exports make bigger contributions to growth, the recovery could stall.”
The survey recorded a slight increase, to 18 per cent, of business owners that were worried by the prospect of interest rate rises.