UK economy is on the right track, says British Chambers of Commerce report

The latest figures released as part of the British Chambers of Commerce's Quarterly Economic Survey (QES) show improvements in most key areas for both manufacturing and services compared with Q2, thus proving that the UK economy is on its way to recovery.

The BCC's Quarterly Economic Survey is made up of responses from more than 7,400 businesses, and provides some very interesting findings.

Hence, the figures point out that, for both manufacturing and services, most key balances are stronger in Q3 than in Q2, with critical balances now stronger than long-term historical averages. Furthermore, it's interesting to point out that several key manufacturing balances are at all-time highs: home deliveries (+38%); employment (+32%); employment expectations (+29%); cashflow (+22%); turnover confidence (+66%) and operating at full capacity (+46%).

Another interesting detail is the fact that employment also rose in the services sector to +20%, and is at its best level since 2007.

During the same time interval, business confidence in turnover and profitability remains high. In both manufacturing (+66% and +46% respectively) and services (+58% and +39%) these figures are all above pre-recession levels.

Both export balances in the service sector (sales and orders) fell slightly but remain at historically high levels, while the pressure to raise prices increased in Q3. In manufacturing, this rose 12 points to +27%, and in services, the balance increased 11 points to +23%. Raw material costs were given as one of the main factors in both sectors.

David Kern, Chief Economist at the BCC, said: "It's clear that the UK upturn is gathering momentum, with most key balances in this quarter higher than their pre-recession levels in 2007. On the basis of these results, GDP growth in Q3 could well be around 0.9-1.0%, with our full-year forecasts for 2013 and 2014 likely to be revised up further. However these strong results must not lull us into a false sense of security.

"Growth will continue, but it is likely to slow slightly following this recent spurt. External shocks from the US shutdown, possible debt default and tapering, and continued risks elsewhere in the world could all impact on our fragile recovery. At home, the impact of reducing the deficit, fixing the banking system, and the relentless squeeze on living standards will inevitably act as a constraint on growth in the next few years."