The British economy prepares for weaker 2018, revealing a humorous corporate mood before Brexit. The companies continue to struggle with price pressures over the last three months of 2017 and are reluctant to invest more, according to the British Chamber of Commerce’s quarterly economic survey.
The services sector, which holds the larger share of the British economy, is continuing to expand at a slow pace. The manufacturers are better off than service companies, but they still have a slowdown in sales both inside and outside the country.
Overall, the survey suggests that the economy growth was weak at the end of last year, after expanding 0.4% quarter on quarter in the three months to September – under historical trends of about 0.6%.
“The economy will continue on the path to weak growth in the short term, feeling uncertain about Brexit’s influence, which coupled with high inflation and weak productivity, is likely to shrink economic activity altogether”, said the Chief Economic Officer of the Chamber, Suren Thiru.
The economists in general expect the world’s sixth largest economy to expand moderately in 2018, worse than most other countries but better off against the bleak prospects posted after the Brexit referendum in the mid-2016.
The survey shows that the proportion of service companies reporting difficulties in hiring new people has risen to 71% – the highest share ever since statistics began in 1989. The British Chamber of Commerce warns that this may be the biggest hurdle for business in 2018, and calls on its members to train more employees and not simply complain about labor shortages.
More than a third of service companies are expected to raise their prices over the next three months, which is the largest share since late 2008.
This will raise concerns for representatives of the British Central Bank, as the Chamber’s indicators correlate well with official output price measures that point to future inflationary pressures.
Last month, Bank of England said that inflation is likely to slow down in 2018. The consumer price index rose to its highest levels from almost six years in November to 3.1%. The Central Bank expects further improvement in business investment in 2018.
However, the Chamber’s study shows no signs of a steady improvement in investment plans among service companies or manufacturing companies.