British companies have been urged to be upbeat about growth in 2014, as a new industry survey forecasted that the economy is set to improve in the next 12 months.
The British Chambers of Commerce (BCC) has estimated “higher full-year growth for 2014” after its analysis of 8000 UK firms in the last three months showed the key indicators for the economy are higher than before the start of the financial crisis.
During the fourth quarter (Q4) of 2013, the manufacturing sector’s five indicators were shown to be at all-time highs. This included domestic orders increasing by 4% quarter-to-quarter to +35% and employment expectations surged by two points to +31%. Similarly in the service industry, net domestic orders rose from +28% in the third quarter (Q3) of 2013 to +32% in Q4 2013, the best level since the first quarter of 1997, while it’s employment expectations balance reached +27% – the best rate since Q4 2007.
Based on these results, BCC chief economist David Kern predicts economic growth of 0.9% during Q4, stating: “In our recent economic forecast we have predicted 0.8% quarterly GDP growth in Q4 2013, after 0.8% in Q3. On the basis of this survey, our Q4 growth may be upgraded to 0.9%, and this may lead to higher full-year growth for both 2013 and 2014.”
Despite the boost in company confidence, BCC director general John Longworth has said increased access to financing is still needed to create further growth. Longworth told the BBC: “To have a great economy…we need infrastructure investment, we need to change the structure of business finance in the UK.”
The BCC is not the only organisation with buoyant expectations of the British economy. The Office for Budget Responsibility has confirmed its prediction of 2.4% growth in 2014, after last month raising its estimate for 2013 growth to 1.4% from the 0.6% it predicted in March.
Kern confirmed the UK economy is being stimulated by an improved housing market, but warned that the government will have an essential role in making sure companies are able to take full advantage of enhanced market confidence.
“The upbeat results of our survey, with most Q4 key balances higher than their 2007 pre-recession levels and some at their all-time highs, suggest that the UK recovery will continue to strengthen further in the short term,” Kern said.
“However, the current level of growth, driven by buoyant housing and strong increases in household consumption, will weaken slightly in reaction to unduly high personal debt levels. GDP growth is likely to be slower in 2015 than in 2014. Strong export and investment balances in our survey confirm that business is ready to play a key role in rebalancing the economy, but the government and the MPC must create the necessary conditions for this to happen. While risks still persist both at home and abroad, the positive results of our Q4 survey will boost confidence as we enter 2014.”