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The QES for Q1 2020 suggests that UK economic conditions were relatively subdued before the unprecedented economic storm caused by the Covid-19 outbreak took hold. The services sector saw domestic activity improve but indicators for export activity weakened and remain at their lowest level since 2011.
Domestic and export activity in the manufacturing sector remained underwhelming. With the pause button being pressed on large parts of the UK economy, a historically significant weakening in economic output in Q2 is expected.
Suren Thiru Head of Economics, British Chambers of Commerce
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BRITISH CHAMBERS OF COMMERCE
QUARTERLY ECONOMIC SURVEY Q1 2020The British Chambers of Commerce’s Quarterly Economic Survey is the UK’s largest private sector survey of business sentiment and a leading indicator of UK GDP growth. The results for Q1 2020 indicate that while business confidence began to improve as a result of renewed political clarity at the end of 2019, this was offset by the growing impacts of Covid-19 on the wider UK economy.
AT A GLANCE
www.britishchambers.org.uk | @britishchambers
Do
mes
tic
Sale
s E
xpo
rt S
ales
Exp
ort
Ord
ers
Positive balance (+) = growth | Negative balance (-) = contraction
ISSN 2398-4406
BCC ECONOMICS
+3%
+100%-100%
-75%
0%
-50%
+25%
+50%
-25%
+75%
...of manufacturers reported increased domestic sales in Q1 2020,
down from +4% in Q4 2019
+16%
+100%-100%
-75%
0%
-50%
+25%
+50%
-25%
+75%
...of service firms reported increased domestic sales in Q1 2020,
up from +11% in Q4 2019'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20
-60%
-40%
-20%
0%
20%
40%
60%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
QES % Balance
GDP %Growth (ONS)
UK GDP growth vs. QES balance of firms reporting improved domestic sales
GDP Growth Service Sector QES Manufacturing QES
2008 recession
EU ref
+3%
+100%-100%
-75%
0%
-50%
+25%
+50%
-25%
+75%
...of manufacturers reported increased export sales in Q1 2020, down from
+4% in Q4 2019
0%
+100%-100%
-75%
0%
-50%
+25%
+50%
-25%
+75%
...of service firms reported increased export sales in Q1 2020,
down from +5% in Q4 2019
-1%
+100%-100%
-75%
0%
-50%
+25%
+50%
-25%
+75%
...of manufacturers reported increased export orders in Q1 2020,
up from -3% in Q4 2019
-2%
+100%-100%
-75%
0%
-50%
+25%
+50%
-25%
+75%
...of service firms reported increased export orders in Q1 2020,
down from 0% in Q4 2019
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
QES % Balance
Balance of firms reporting improved export sales
Manufacturing Sector QES Service Sector QES
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
QES % Balance
Balance of firms reporting improved export orders
Manufacturing Sector QES Service Sector QES
The survey of over 6,200 firms, employing more than 1.2m people, found that while investment and confidence began to gradually improve in Q1, shorter term indicators around cash flow showed prolonged underlying weakness, even before the full impacts of the Covid-19 crisis became clear.
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Pri
ces
Inve
stm
ent
Cas
h Fl
ow C
onfi
den
ce
BRITISH CHAMBERS OF COMMERCE
LOOKING AHEAD
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20-30%
-20%
-10%
0%
10%
20%
30%
40%
QES % Balance
Balance of firms increasing investment in training
Manufacturing Sector QES Service Sector QES
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20-40%
-30%
-20%
-10%
0%
10%
20%
30%
QES % Balance
Balance of firms reporting improved cash flow
Manufacturing Sector QES Service Sector QES
'07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
QES % Balance
GDP %Growth (ONS)
UK GDP growth and QES balance of firms confident their turnover will increase
GDP Growth Service Sector QES Manufacturing QES
33%
70%
22%
50%
28%32% 30%
60%
Paysettlements
Raw materials Financial costs Otheroverheads
Firms facing pressures to raise prices due to the following factors:
Manufacturing Sector
Service Sector
+16%
+100%-100%
-75%
0%
-50%
+25%
+50%
-25%
+75%
...of manufacturers increased investment in training in Q1 2020,
up from +11% in Q4 2019
+15%
+100%-100%
-75%
0%
-50%
+25%
+50%
-25%
+75%
...of service firms increased investment in training in Q1 2020,
up from +11% in Q4 2019
+28%
+100%-100%
-75%
0%
-50%
+25%
+50%
-25%
+75%
...of service firms expect their prices to increase, down from +29% in Q4 2019
+33%
+100%-100%
-75%
0%
-50%
+25%
+50%
-25%
+75%
...of manufacturers expect their prices to increase, down from +35% in Q4 2019
+34%
+100%-100%
-75%
0%
-50%
+25%
+50%
-25%
+75%
...of manufacturers are confident turnover will increase in the next 12 months, up from +27% in Q4 2019
+38%
+100%-100%
-75%
0%
-50%
+25%
+50%
-25%
+75%
...of service firms are confident turnover will increase in the next 12 months, up from +32% in Q4 2019
-6%
+100%-100%
-75%
0%
-50%
+25%
+50%
-25%
+75%
...of manufacturers reported improved cash flow in Q1 2020,
down from +1% in Q4 2019
+3%
+100%-100%
-75%
0%
-50%
+25%
+50%
-25%
+75%
...of service firms reported improved cash flow in Q1 2020,
up from +2% in Q4 2019
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Scotland+10%
North West+7%
In Q1 2020, the balance of manufacturers reporting increased cash flow fell back into negative territory and stood at -6%, the second lowest level since 2011. In the services sector, the balance of firms reporting increased cash flow remained weak at +3%. Many firms cited the onset of the Covid-19 crisis as a key impact on business performance.
The below chart shows the geographical breakdown of the balance of firms reporting increased cash flow.
North East0%
Yorks & Humber+5%
East Midlands
0%Northern Ireland-13%
Wales-1%
West Midlands+7%
East of England-4%
London+1%
South East-8%
South West-1%
BRITISH CHAMBERS OF COMMERCE
CASH FLOW
“We are being affected significantly by the coronavirus, not receiving goods from China since the middle of January”
Small manufacturer in Norfolk
“Our products are manufactured in China. Due to coronavirus, the office and factory in China is not
functioning because of transport being stopped..”
Manufacturer in Mid-Yorkshire
“The slightly gloomier outlook for the next 12 months is the result of coronavirus which is already having an impact on events we are
working on in mainland Europe for clients..”
Small marketing firm in Hampshire
“Just as confidence to invest seemed to be recovering, and there were positive indicators for increasing future turnover, along came coronavirus.”
Transport firm in Inverness
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MethodologyQES results are generally presented as balance figures - the percentage of firms that reported an increase minus the percentage that reported a decrease. If the figure is a plus it indicates expansion of activity and if the figure is a minus it indicates contraction of activity. A figure above 0 indicates growth, while a figure below 0 indicates contraction.
For example, if 50% of firms told us their sales grew and 18% said they decreased the balance for the quarter would be +32% (an expansion).
If 32% told us their sales grew and 33% said they fell the balance would be -1% (a contraction).
The Quarterly Economic Survey is the flagship economic survey from the British Chambers of Commerce. It is a prominent tool used to measure the state of business sentiment and is monitored by a range of national and international organisations, including the Bank of England, HM Treasury, and the European Commission.
The BCC Q1 2020 QES is made up of responses from 6,275 businesses across the UK. Firms were questioned between 17 February and 13 March 2020. In the manufacturing sector, 1,579 firms responded, employing approximately 338,600 people. 74% (1,174) of manufacturing respondents were exporters. In the services sector, 4,696 businesses responded, employing approximately 937,600 people. Of the services sector participants, 47% (2,185) were exporters.
National Coordinator: David Bharier [email protected] British Chambers of Commerce, 65 Petty France, London SW1H 9EU (020 7654 5800)
Scotland Coordinator: Colin Campbell [email protected] Scottish Chambers of Commerce (0141 444 7508)
North East Coordinator: Jonathan Walker [email protected] North East England Chamber of Commerce (0191 3861133)
North West Coordinator: Subrah Krishnan-Harihara [email protected] Greater Manchester Chamber of Commerce (0161 393 4321) Contributing Chambers: St Helens, Liverpool, North & West Lancashire, East Lancashire, Greater Manchester, Cumbria, South Cheshire, Wirral
Yorkshire & the Humber Coordinator: David Bharier (BCC) Contributing Chambers: Barnsley & Rotherham, Doncaster, Sheffield, Hull & Humber, West & North Yorkshire, and Mid Yorkshire
East Midlands Coordinator: Chris Hobson [email protected] East Midlands Chamber (Derbyshire, Nottinghamshire & Leicestershire) (0116 204 6606): Contributing Chambers: Derbyshire, Nottinghamshire & Leicestershire, Northamptonshire, Lincolnshire
West Midlands Coordinator: Matthew Lowe [email protected] Black Country Chamber of Commerce (01902 912334) Contributing Chambers: Coventry & Warwickshire, Birmingham, Black Country, Staffordshire, Shropshire, Herefordshire & Worcestershire
Wales Coordinator: Katrina Thomas [email protected] South Wales Chamber of Commerce (01633 242730) Contributing Chambers: South Wales, West Cheshire and North Wales
East of England Coordinator: David Bharier (BCC) Contributing Chambers: Bedfordshire, Cambridgeshire, Essex, Hertfordshire, Norfolk and Suffolk
South East Coordinator: David Bharier (BCC) Contributing Chambers: Kent Invicta, Hampshire, Surrey, Sussex, Isle of Wight, Milton Keynes, Thames Valley
South West Coordinator: David Bharier (BCC) Contributing Chambers: Business West, Dorset, Cornwall, Somerset, Devon
London Coordinator: David Bharier (BCC) Contributing Chambers: London
Northern Ireland Coordinator: Christopher Morrow [email protected] Northern Ireland Chamber of Commerce (028 9024 4113)
BRITISH CHAMBERS OF COMMERCE
ABOUT THE QES
This report has been prepared by the British Chambers of Commerce. Further information about any of the region and nation surveys may be obtained from the following:
