THE British Chambers of Commerce’s Quarterly Economic Survey is the UK’s largest independent survey of business sentiment and a leading indicator of UK GDP growth.

The most recent results show that while businesses continue to recover from the deepest recession on record, persistent weakness in several indicators highlight concerns over the strength of the recovery, with one in five firms reporting a decrease in cash flow, with a further two fifths seeing no improvement.

Suren Thiru, head of economics at the British Chambers of Commerce, said: “Our latest data indicate only a modest uptick in underlying economic conditions in the third quarter as the boost from the end of restrictions was increasingly stymied by mounting headwinds.

“The key services sector recorded the strongest improvements in the quarter as consumer-focused firms, including hotels and hospitality, received the biggest boost from the easing of social distancing.

“Manufacturing firms saw more limited gains as increasingly acute supply chain disruption limited their ability to fulfil orders and meet customer demand.

“The underwhelming uptick in investment intentions means that it may be weak point of the recovery because it would weaken our ability to boost productivity and lift the UK’s long-term growth trajectory.”

The survey of 5,737 finds that despite business activity improving as more firms report increased domestic sales, indicators for structural business health such as investment and cash flow are lagging. Inflation expectations also hit record highs as 62 per cent of manufacturers expect their prices to rise in the next three months while only 2% expect a decrease, giving a percentage balance of +60 per cent.

Around 9 in 10 (88 per cent) of manufacturers cite raw materials costs as the driver of price increases. In contrast, just one in five (22 per cent) of manufacturers cite pay settlements as a driver of price increases, still below its pre-pandemic level In Q3 2021, the balance of manufacturing firms expecting prices to increase over the next three months rose to its highest level on record. Furthermore, when asked which factor was more of a concern to their business than three months ago, ‘inflation’ is now cited as the top answer. Fifty-two per cent of firms overall and 62 per cent of manufacturers cited this as a concern above other factors listed including ‘interest rates’, ‘exchange rates’, ‘business rates’, ‘competition’, and ‘taxation’. This is the highest since records began for this indicator in 2009.

The Quarterly Economic Survey is the flagship economic survey from the British Chambers of Commerce. It is a prominent tool used to measure the state of business sentiment and is monitored by a range of national and international organisations, including the Bank of England, HM Treasury, and the European Commission.

The BCC Q3 2021 QES is made up of responses from 5,737 businesses across the UK. Firms were questioned between 23 August and 13 September 2021. In the manufacturing sector, 1,448 firms responded, employing approximately 372,000 people. Sixty-nine per cent (1,000) of manufacturing respondents said they exported. In the services sector, 4,289 businesses responded, employing approximately 1.6m people. Of the services sector participants, 37 per cent (1,600) said they exported.