A boost in manufacturing has failed to lift the UK economy which grew at a “muted” rate in the third quarter of 2017, the British Chambers of Commerce has warned.
Buoyed by a rise in exports and domestic orders, the number of manufacturers reporting improved sales rose in the period to its highest level since the first quarter of 2015.
However, the services sector, which represents more than three-quarters of output and is traditionally the main driver of economic growth, remained static.
Businesses in both sectors cited recruitment concerns with nearly three-quarters of manufacturers reporting difficulties hiring workers, while the services sector said problems recruiting staff were at their highest level since early 2016.
Dr Adam Marshall, Director General of the British Chambers of Commerce, said the survey results were “uninspiring” and “reflect the fact that political uncertainty, currency fluctuations and the vagaries of the Brexit process are continuing to weigh on business growth prospects”.
He said Chancellor Philip Hammond’s Autumn Budget provides “a critical opportunity” for the Government to “take bold action” to “help the economy rebound from a period of anaemic growth”.
Image: The services sector, the main driver of growth, remains static
“A failure to act, or a conscious choice to provide a short-term sugar hit to the electorate rather than the protein boost the economy needs, would have significant consequences for the UK’s medium-term growth prospects,” he warned.
The BCC said it was “extraordinary” that the Bank of England is considering raising interest rates “against this backdrop”.
There was little sign in the survey of a pick-up in pay pressures or investment, both of which the BoE expects to rise markedly next year.
Suren Thiru, head of economics at the BCC, said: “We’d caution against an earlier than required tightening in monetary policy, which could hit both business and consumer confidence and weaken overall UK growth. While interest rates need to rise at some point, it should be done slowly and timed to not to harm the UK’s growth prospects.”
Last month the Bank said a hike should not be feared, fuelling speculation that there may be an interest rate increase as soon as November.
The Bank’s main rate of interest is currently at 0.25%, having been cut in the wake of last year’s referendum result.
The BCC’s quarterly survey, the largest of its kind, was based on the responses of more than 7,100 businesses who were quizzed between 21 August and 11 September on a wide range of issues.