Good news on exports amid gloom

Jul 8 2008 by Andrew Mernin, The Journal

The UK is now ``at serious risk“ of recession as falling orders and rising costs tighten the squeeze on business, the British Chambers of Commerce has warned.

Services firms saw ``alarming“ declines in the second quarter of 2008, with those reporting lower orders outnumbering those recording rises for the first time since 1990, its survey of almost 5,000 firms found.

The BCC also warned the Government against hitting firms with more taxes in an effort to boost public revenues as the economic gloom grows.

Director-general David Frost said: ``The temptation for the Government will be to raise business taxes because the exchequer is running out of money. This would be a catastrophe.

"To put more pressure on business would not only restrict growth and hit the consumer hard, it would further crush what our economy is based on - confidence.”

Confidence among services firms - which account for almost three-quarters of the economy - is also at its lowest ebb since 1990, the survey added.

The BCC’s economic adviser David Kern said the survey showed a ``menacing deterioration“ in UK prospects.

He added: ``The outlook is grim, and we believe that the correction period is likely to be longer and nastier than anticipated.”

Firms are facing soaring costs from rising electricity bills and raw materials as oil approaches 150 US dollars a barrel, while banks hit by the crunch clamp down on lending. This has put cashflow among UK firms under the most pressure since 1992, the BCC said.

Meanwhile, a new report by the North East Chamber of Commerce (NECC) has warned that the global economic turmoil is having a significant effect on business performance and confidence in the region.

The NECC quarterly economic survey said that international exports from the North East are on the up, despite tough times in the domestic market.

But according to the NECC’s Business Barometer, companies in the North East are feeling the same pain as householders over soaring energy costs.

A series of indicators in the survey have dropped markedly since the first quarter of the year, reflecting challenging conditions around the globe.

Worries over energy prices are the highest recorded by the NECC with 87% of respondents citing them as a major concern and 82% of businesses admitting to concerns over inflation.

NECC members reported falling UK sales and orders in the second quarter of 2008 while the report also found forecasts of future profitability to be on a downward slide.

A rare glimmer of hope in the survey showed that exports are continuing to grow while UK sales orders among North East manufacturing firms remained steady.

NECC chief executive James Ramsbotham said: “These results underline our increasing nervousness about conditions for North East businesses, which face many of the same concerns we all do as consumers and householders.

“The high level of worry over energy costs will come as no surprise, and we have already written to the Energy Minister, Malcolm Wicks and the major utilities companies to alert them to this.”

He also said the North East could take some solace from export growth.

Click here to see the full NECC report.

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PAGE TWO: Sobering statistics from the job market and manufacturing.