Modest improvement in domestic sales but economic growth remains subdued

The results of the latest Quarterly Economic Survey (QES) from the Chamber of Commerce show that despite a modest improvement in activity in the second quarter of 2018, economic conditions remain sluggish across the county.

The Q2 2018 survey, compiled by the county’s three Chambers of Commerce in association with MHA Moore and Smalley Chartered Accountants and Business Advisors, suggests that Lancashire firms have endured another quarter of subdued growth, although there were gains in the domestic sales and order balances in both sectors.

Growth in export sales weakened in comparison to the first quarter of 2018, suggesting that slowing global economic growth is forcing businesses to look domestically for sales.

Fewer firms look set to increase prices in coming quarter as concerns about exchange rates and the cost of raw materials weakened.  Confidence that turnover and profitability would increase in the year ahead remained relatively unchanged, whilst investment intentions in both sectors improved despite ongoing confusion around Brexit.

Commenting on the results, Alan Welsh, Policy Manager at the North & Western Lancashire Chamber, said:

“Amid growing international uncertainty, from escalating trade disputes to oil price rises, our economy continues to grow at a sluggish rate. Brexit is a key factor – but long-standing structural issues are also holding companies’ growth back.

“Bold action is needed from government in order to buck the current slow-growth trend – including major new incentives for business investment, confidence-boosting infrastructure projects, and a concerted effort to slash the up-front cost of doing business.”

The results from the Chambers of Commerce survey were revealed to an audience of local businesses at Preston’s College this morning (Thursday 12th July) by Stephen Gregson, Corporate Finance Director at MHA Moore and Smalley.  Commenting on the survey, he said:

“While the modest pick-up in domestic activity points to a slight rebound in growth from a weak first quarter, there remains little evidence in the current data to suggest a sustained upturn in economic growth prospects.

“The latest results indicate that cost pressures eased markedly in the quarter, suggesting that inflation will drift downwards over the near term. Significantly, there remains very little evidence that above target inflation is translating to stronger pay settlements, with weak productivity and the high upfront cost of doing business continuing to limit the extent wages are able to rise.

“Against this backdrop, the Bank of England’s recent rhetoric around raising interest rates continues to look ill-judged. With the UK economy seemingly stuck on a low growth path and inflation easing, it would be prudent for the MPC to provide greater monetary stability rather than undermining the UK’s growth prospects further.”

Download: Q2 2018 – Report

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