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The British Chambers of Commerce (BCC) Quarterly Economic Survey is the UK’s largest private sector report on corporate sentiment, a report that includes polls from more than 5,600 companies – 92 per cent of which are SMEs – on current trade, investment and sales .
It is also the one study most scrutinized by policy makers, the Treasury and the Bank of England because it provides such a revealing snapshot of what is really going on at UK plc.
If that’s the case, the mandarins had better put on their tin hats and get out their calculators.
Commitments: Prime Minister Rishi Sunak said he would cut inflation in half to lower the cost of living, provide better paying jobs and ensure that the national debt falls
They won’t have been happy with what they read from the latest survey, which took place last November before and after Jeremy Hunt’s fall statement.
It showed that there were major declines in all economic indicators for those surveyed in the fourth quarter of last year, continuing the decline seen in the third quarter.
Even worse, confidence in profitability is at Covid crisis levels, with only one in three companies expecting earnings to rise this year.
More than a third expect a decline. Only a third of SMEs saw turnover increase in the past quarter, while more than a third expect a decrease.
Not surprisingly, retail and hospitality are weak, with three-quarters of restaurants and pubs operating well below capacity.
What is even more worrying is that so few companies plan expansion through investment, either in factories or in hiring staff.
Only a fifth are considering investing in the coming months, while the same number are reporting a decline.
The rest just depends.
Higher inflation, sky-high energy costs and labor shortages are mainly to blame for the lack of confidence. Until now.
We now have another specter lurking: the six percentage point corporate tax increase that companies will have to pay in April, one that could be the final blow for many. David Bharier, BCC’s head of research, puts it neatly: “For many, the cost of doing business is now simply too high.”
He also says that while Hunt’s emergency declaration calmed markets, his policies failed to restore business confidence.
He’s right: the reverse is true. Come April, the double whammy of higher personal taxes and higher corporate taxes will be crippling. If business and consumer confidence is now low, what will happen?
Hunt is keen to point out that there were a lot of goodies in his budget that should boost the supply side to drive more growth.
Aside from Edinburgh’s reforms for the city, it’s hard to see what they are.
Even Liz Truss’ smarter reforms, such as boosting childcare, have been swept aside. Instead, Rishi Sunak and Hunt should go further and be more radical, offering tax relief to all working parents.
This would lower the cost of living for couples and make the job market easier. What business needs now to boost confidence is clarity, particularly on future energy costs after the relief package expires in March.
The Prime Minister yesterday went out of his way to set out his ambitious vision for future growth, claiming he would cut inflation in half to lower the cost of living, provide better paying jobs and ensure that the national debt falls.
He may be right about inflation: the Bank of England and the Office for Budget Responsibility predict it will fall below 4% by the end of 2023 as prices fall around the world.
But Sunak has to do more than invent more platitudes. He should show, not tell.
And start scrapping some silly April tax increases or cutting government spending. There must be something to give.
Morrisons under pressure
Santa has missed his visit to Morrisons. The turnover of the supermarket group fell by 2.9 percent in the 12 weeks to December 25.
Kantar estimates that grocery sales rose 7.6 percent over that period — and year-over-year growth in December was higher at 9.4 percent — which isn’t very promising.
You have to wonder if Morrisons is under pressure following the takeover by US private equity house Clayton Dubilier & Rice.
It’s loaded with around £6bn in debt, a recent credit cut from Fitch’s, lower profits and market share.
Headhunters are currently looking for a new chief executive to replace David Potts, who is leaving next year, while the chief operating officer recently stepped down.
A vacuum at the top, at the same time as one of the most volatile grocery markets in decades, is a recipe for disaster.
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