Economic growth in the UK was “muted” in the third quarter despite strong improvements in the manufacturing sector, the British Chambers of Commerce (BCC) has said.
A survey of more than 7,100 businesses by the not-for-profit body revealed the proportion of firms reporting improved domestic sales and orders both rose to the highest level since the first quarter of 2015.
Export sales and orders also improved, boosted in part by strong economic growth in key markets for UK goods.
However, these improvements were offset by static growth in domestic sales and orders in the services sector, which accounts for nearly 80% of the UK economy.
Expectations for future growth in the services sector were also muted, including employment expectations, investment in training, and confidence in profitability and turnover.
Suren Thiru, head of economics at the BCC, said it was “extraordinary” that the Bank of England was considering raising interest rates in such an uncertain economic climate.
Bank of England Governor Mark Carney has suggested that interest rates, which have been stuck at a record low of 0.25% since August 2016, would go up in the near term.
“With UK economic conditions softening and continued uncertainty over Brexit, it is vital that the MPC (Monetary Policy Committee) provides monetary stability,” Thiru 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.”
BCC director general Adam Marshall said political uncertainty, currency fluctuations and uncertainty created by Brexit negotiations were all weighing on business growth prospects.
“The Chancellor’s Autumn Budget is a critical opportunity to demonstrate that the government stands ready to incentivise investment and support growth here at home,” he stated.
“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.”
Source : IBtimes